The total deficit of FTSE 100 pension schemes has fallen by £29 billion to £28 billion, research from Pension Capital Strategies.

The research also revealed that just six of the FTSE 100 have schemes in surplus and almost 10 per cent have pension liabilities which are greater than the size of the company - a material risk to the company’s ongoing stability, PCS warns.

Yet, Nick Raynor, investment adviser at The Share Centre, said that overall, investors should be pleased with these deficit figures.

He said, 'If these companies can reduce the deficit by £29 billion, it highlights how much cash they have generated over the last year. This is a good sign, and should give investors more confidence in these companies.'

He added, 'If the FTSE companies continue to put this sort money away this year, investors might be able to stop worrying altogether about the pension deficit of these firms, and shareholders might see added value, such as dividends.'

The FTSE 100 companies with the best-funded pension schemes overall at the end of December 2010 were Old Mutual, Prudential, Resolution, British Land, Man Group, Investec, AMAC, Morrison Supermarkets, Rolls Royce, and Associated British Foods.

The companies with the worst funded pension schemes were WPP, Hammerson, GKN, AstraZeneca, SABMiller, BG, Wolseley, Sage Group, Vedanta Resources, and Eurasian Natural Resources.

The total deficit funding last year amounted to £12.1 billion, a £7.9 billion increase on the from £4.2 billion the year before. Royal Dutch Shell led the way with a massive deficit contribution of £2.7 billion in its latest set of accounts.
 
Pension schemes' flight out of equities into bonds appears to have halted, the research also shows. The average pension scheme asset allocation to bonds is now 49 per cent, the same as last year. This follows a significant shift, from 41 per cent the previous year and 35 per cent three year.

Despite the reduction, the pension schemes deficit still represent a material risk to FTSE 100 companies, according to the research.
 
Although there has been an increase of almost 200 per cent in deficit funding contributions, ongoing defined benefit - or final salary - pension provision has fallen by 15 per cent over the past year. Pension Capital Strategies warned that the majority of defined benefit schemes will be closed this year.