Pension deficit lowered within FTSE 100 companies

Link: Pension deficit lowered within FTSE 100 companies
Filed under: Pensions News, Finance News

A report from actuary firm Lane, Clark and Peacock says that the combined pension fund deficit of FTSE 100 companies fell from £42bn to £37bn in the year to July. This was mainly due to increased employer contributions and improved stock market performances.

Martin Slack, senior partner at Lane, Clark and Peacock told BBC News that although firms are making larger contributions and investment performance is improved, scheme members are living longer and interest rates are low.

The group said that if this trend continues, the deficit will not be closed until at least 2013.

Mr Slack warned that the deficit at some firms had actually increased over the past year and that unless they significantly increased contributions their schemes could be in deficit for “tens of years.”

Over the past 12 months companies collectively paid £10.5bn into their employee pension schemes - a record amount. Many firms are replacing final salary schemes, which guarantee a retirement income based on length of service, with money purchase schemes. Under money purchase schemes, firms only guarantee how much they will pay into a worker’s pension and do not specify how much the pension will be worth on retirement.

The report identified the following firms as having some of the largest pension deficits: BAE Systems, British Airways, BT, ICI, Royal & SunAlliance and Rolls Royce. However, three firms in the FTSE 100 do not have a pension scheme deficit: Associated British Foods, Johnson Matthey and Old Mutual.