Top firms face worst pension deficit ever

FTSE GLOBAL 100 companies are running a record combined pension deficit of &euro;220bn (&pound;200bn) as the financial crisis continues to bite.<br /><br />The deficit, as at the end of September, is the largest shortfall on record and compares with an equivalent figure of &euro;180bn at the end of 2008 and just &euro;20bn a year earlier.<br /><br />Consulting actuaries Lane Clark &amp; Peacock (LCP), who compiled the report, said the year to September 2009 had been good for investments, but those gains were decimated by falling corporate bond yields, which are used to measure pension liabilities.<br /><br />The firm said the combined deficit would increase by &euro;150bn if corporate bond yields returned to pre-crunch levels.<br /><br />On average, FTSE Global 100 pension deficits increased by &euro;1.6bn per company during 2008, but major companies Shell, IBM and General Electric all racked up shortfalls of more than &euro;15bn.<br />Shaun Southern, head of LCP&rsquo;s International Practice, said: &ldquo;While finance directors will be breathing a collective sigh of relief that financial markets are recovering, any benefits to the accounting positions of pension schemes have been wiped out by falling corporate bond yields.<br /><br />&ldquo;Multinationals face a bewildering array of pension issues over the next 12 months, from increasing calls for cash from pension plans to the pension implications of resurgent M&amp;A activity and the desire to reduce risk. It is vital that companies understand these issues and have an integrated long-term pensions strategy to deal with them.&rdquo;<br /><br />The report said the ballooning deficits means finance directors can expect increased cash demands from their pension plans next year &ndash; just at a time when most companies need cash to weather the recession and take advantage of new opportunities&nbsp; as the economy recovers.

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