Huge 300bn hole in FTSE 100 pensions
THE total pension deficit at FTSE 100 companies has more than doubled since January, rising to a staggering £300bn, Deloitte said yesterday.
Fallout from the global financial crisis has decimated the value of pension funds’ investments, the accountancy giant said, adding that the shortfall could take 50 years to clear if firms continue to contribute cash at the current rate.
The deficit, which is around a quarter of the market capitalisation of the entire FTSE 100, compares to a £130bn shortfall at the end of 2008, Deloitte said.
Deloitte estimated the total shortfall by simulating the calculations carried out every three years by pension trustees, which help set the contributions from corporate sponsors.
This figure tends to be far higher than annual deficit calculations carried out by the companies themselves according to accounting standards.
David Robins, a partner in Deloitte’s pensions consulting practice, said that the £300bn shortfall is the worst on record and that the recent spate of pension scheme closures will become a sustained trend.
And he warned that even if companies were to close all their schemes tomorrow, the deficit would still take decades to clear, meaning firms needed to find new ways to close the gap.
“In the past, a company has had to put cash contributions into the schemes, but firms haven’t got the cash anymore and can’t get lending from the banks.”
He added: “Instead, they’re looking at other assets, such as their property portfolios or headquarters, and handing them over to pension trustees, meaning there is a shift in value away from shareholders to pension trustees.”
Deloitte’s report comes just a day after American Express announced it was freezing pension contributions for all of its 6,000 UK staff for 18 months.
Five years ago, about 40 per cent of companies offered final salary pensions schemes. But according to pensions expert Ros Altmann, there are now just four firms in the FTSE 100 – Shell, Cadbury, Tesco and Diageo – that still do so.