Pension Deficits for FTSE 100 Companies Top £300 Billion
More than £300 billion is needed by pension scheme trustees of FTSE 100 companies to plug deficits in their schemes more than double the estimated aggregate deficit of £130 billion at the start of the year, according to new estimates.
Business advisory firm Deloite says this is the highest the deficit has ever been. BT, BP and Barclays are just some of the high profile names that have announced plans to review or close their final salary pension schemes. Companies have reduced the cost of their pension schemes by reducing the benefits provided by final salary plans or moving to a cheaper defined contribution scheme for new employees. However employers are still facing a shortfall. Cash contributions alone would mean it would take fifty years to make up the deficits, so Deloitte expects more companies will have to top up their schemes by shifting capital and assets to their pension fund. This could include real estate assets, the value of brands or other investments. Deloitte expects this trend to increase significantly over the next few years. David Robbins, a partner in Deloitte’s pensions consulting practice, said: 'Significant cash contribution increases would be unaffordable for companies. The solution to this that companies need to consider is to transfer the value of their assets to the pension scheme.' And more schemes will have to close to all employees, said Robbins. 'With the current unprecedented funding levels in pension schemes and with companies being forced to cut costs in order to remain afloat, we expect to see many more pension schemes closing.
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