The pension scheme deficits of the UK`s top 350 public companies have widened further; according to the actuarial firm Mercer. This news comes at a time where there have been strikes at British Gas, a hike in stamp prices, BA pilots threatening action, and a pensions’ review at IBM - all because of the strains on company pensions.
Likewise, the Daily Mail recently reported on its font page that many companies are unable to fulfil their corporate retirement obligations. Already companies like Coop, Arcadia, Astra, Barclays etc have ceased their pension plans or are seeking financial support to keep them from going under. As Candour Consultancy has been reporting over the last year, the final salary company pension scheme is a burden that even the largest firms cannot maintain
Mercer calculated that the combined deficit of their pension funds rose from £75bn in 2004 to £93bn last year, Mercer said. That was despite a rise in the value of the UK stock market, which boosted the assets of many schemes. Mercer said the cost of paying pensions also rose because of lower returns on bonds and increased life expectancy.
`Favourable investment performance did little to dilute the value of pension scheme deficits in 2005,` said Tim Keogh, worldwide partner at Mercer.
`Just as people have to pay more to trade up their house after a property boom, despite the value of their current home increasing, employers have to contribute larger cash sums to reduce their pension scheme deficits when all markets rise,` he added.
The increased deficits calculated by Mercer highlight the continuing strain on company pension funds and the finances of the employers who run them. The last decade has seen many private sector final-salary schemes close to new members. Now there are fears that many employers will also start to move existing staff into less generous schemes which are cheaper to finance.
So far this year both the Co-operative Group and the retail conglomerate Arcadia have outlined plans to save money by changing their pension schemes for current staff.
In December, Rentokil became the first company in the FTSE 100 share index to say it wanted to close its final-salary scheme for all staff and not just new members.
I am worried about my pension arrangements, what can I do?
Candour Consultancy offers a pension analysis service. This is a free, no obligation service where a FPC qualified consultant will help you analyse what level of income your current pension arrangements will provide you in the future, how much income you are likely to require to provide you the lifestyle you wish to enjoy in retirement and the options available to make up any shortfall.
To request the state pension forecast form, just click the ‘contact me’ button below, type PEN ANALYSIS in the comments box and submit with your preferred contact details.
