UK - A downgrading in the credit rating of some of General Electric's corporate bonds has in turn artificially lowered the reported pension deficits at the UK's top 350 listed firms in the first quarter of this year, according to Hymans Robertson.

Latest findings of its PenSafe analysis - which is designed to measure a FTSE 350 company's pension in the context of its sponsor's business - found the true value of pension deficits may be higher than many companies are willing to disclose as activity in the bonds market earlier this year is likely to have distorted the true value of assets compared with actual liabilities.

More specifically, PenSafe found deficits were being understated to the turn of £179bn in December, yet credit spreads widened by 40 basis points by the start of April even though
They had earlier tightened from 2.9% at 31 December 2008 to 2.5% at 31 March 2009 because six of GE's corporate bonds were downgraded from AAA to AA-rated.

This subtle change will have artificially reduced deficits by £35bn under IAS19, said the consulting firm.

Yet the result of such activity has been that while deficits under IAS19 appeared to have lowered to £117bn by 31 March 2009, according to Hyman Robertson,  in reality they had increased to £182bn and some firms have seen their deficits increase dramatically.

Lloyds TSB and RBS, in particular, which are now part of wholly-owned by the State, have combined deficits of £18bn (€20.2bn).

In RBS' case, this is 127% of its market value and would take at least three years to pay off under its 2008 earnings, yet its actually spending on pensions was 77 days of company earnings.

Similarly, Lloyds TSB has a deficit worth 54% of its market value but spent just 43 days of its company earnings in 2008 on its pension,

Any firm with a deficit worth 25% of its earnings is likely to find it will take, on average, a year to pay it off, suggested Hyman Robertson.