PENSIONS CRISIS AS DEFICITS SOAR
FTSE 100 companies are running a combined pension deficit of £96bn, the largest ever recorded, a leading firm of consulting actuaries will reveal today.
The collapse in stock markets means that the shortfall is more than twice the £41bn recorded a year ago, Lane Clark & Peacock’s (LCP) will say.
The financial crisis has also spelled doom for pension schemes at some of the largest firms in the country, with just three FTSE 100 companies – Cadbury, Diageo and Tesco – disclosing that they still run a defined benefit pension scheme.
Supermarket chain Wm Morrison and Barclays bank have recently announced plans to cease accrual of final salary benefits to new members, with Barclays proposing a “cash balance” alternative and Morrisons switching to a career average scheme.
Energy giant BP has also said that it will shut its defined benefit pension scheme to new members, while telecoms giant BT runs a £5.8bn deficit.
“It is only a matter of time before other companies emulate the sorts of actions taken by these large companies,” the report will say.
LCP estimates that had proposals by the International Accounting Standards Board to include pension-related losses on income statements been in place for 2008, pre-tax profits at 48 FTSE 100 companies reporting in December would have been slashed from £36bn to £13bn, based on mid-July 2009 share prices.
Pension schemes have been battered by febrile equity markets and rising life expectancies, while the way in which accountants measure the health of a pension scheme has also changed in recent years, forcing companies to contribute more. LCP partner Bob Scott said: “The outlook for the economy and financial markets remains unclear, creating further uncertainty for pension scheme finances.”
Meanwhile, broadcaser ITV yesterday confirmed that it had asked members of its defined benefits scheme to acccept a change to their terms and conditions after admitting the scheme’s deficit – which stood at £178m at the end of 2008 – had grown.