As the economic downturn seems to be receding we can stop worrying about whether a company is at risk of going under from the weight of its debts; it’s time to return to our previous concern about whether its pension deficit might do the same job.
Pension deficits among FTSE 100 companies after the third quarter of the year were about £100 billion, double the previous year. In the FTSE 250 the gap has risen from £6 billion to £12 billion, even though only around 20 offer defined benefit schemes to a large portion of the workforce. Some 27 companies in the FTSE 250 have pension liabilities greater than their market capitalisation.
The financial crisis hasn’t helped. A study by consultants Lane Clark & Peacock found a massive turnaround in corporate pension accounts. Royal Dutch Shell’s scheme saw a surplus of £6.8 billion turned into a deficit of £5.6 billion. RBS’s scheme went from a £115 million surplus to a £2 billion deficit in 12 months.
The state of their pension schemes, and how regulators respond to them, could have a big impact on the fortunes of some of corporate Britain’s biggest names.
BT’s recent financial results revealed that the deficit of its final-salary pension scheme, closed to future accrual since April, has more than doubled in the past six months from £4 billion to £9.3 billion.
This was higher than many analysts expected and equivalent to more than three-quarters of the company’s total market capitalisation.
Pension deficits return to haunt blue-chips
As the economic downturn seems to be receding we can stop worrying about whether a company is at risk of going under from the weight of its debts; it’s time to return to our previous concern about whether its pension deficit might do the same job.
Pension deficits among FTSE 100 companies after the third quarter of the year were about £100 billion, double the previous year. In the FTSE 250 the gap has risen from £6 billion to £12 billion, even though only around 20 offer defined benefit schemes to a large portion of the workforce. Some 27 companies in the FTSE 250 have pension liabilities greater than their market capitalisation.
The financial crisis hasn’t helped. A study by consultants Lane Clark & Peacock found a massive turnaround in corporate pension accounts. Royal Dutch Shell’s scheme saw a surplus of £6.8 billion turned into a deficit of £5.6 billion. RBS’s scheme went from a £115 million surplus to a £2 billion deficit in 12 months.
The state of their pension schemes, and how regulators respond to them, could have a big impact on the fortunes of some of corporate Britain’s biggest names.
BT’s recent financial results revealed that the deficit of its final-salary pension scheme, closed to future accrual since April, has more than doubled in the past six months from £4 billion to £9.3 billion.
This was higher than many analysts expected and equivalent to more than three-quarters of the company’s total market capitalisation.
via Pension deficits return to haunt blue-chips | Personal Investor | Citywire.
Related posts: