Offshore Capitalist

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:

  1. Britain’s biggest pension schemes battle £44 billion deficit
  2. An ETF for exposure to China blue chips – iShares FTSE Xinhua China 25 (FXC)
  3. Stock market rally driven by ’sentiment’, warns Alliance Trust’s Katherine Garrett-Cox
  4. Landbanking: the plots thicken
  5. Eight of the 10 best-performing currencies are from emerging markets
  6. Shares will rally further – the top managers say
  7. Rio to double spending in 2010
  8. IMA announces record year for investment sales
  9. U.S. Stocks Outlook Is ‘Quite Positive’ for Legg Mason’s Miller
  10. Japan’s trade surplus hits 18-month high
  11. World Economy Continues to Defy the Pessimists
  12. Bernie Madoff ‘astonished’ Feds missed his fraud
  13. Dubai debacle stops bull run in its tracks
  14. Rathbones Economic and Market review – Julian Chillingworth
  15. Land-banking directors banned for 12 years
  • Welcome to Offshore Capitalist

    Do dramatic financial headlines every day drive you crazy? Forget them! Drop by Offshore Capitalist every now and then to catch the useful stuff.