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Massive e102bn losses for FTSE 100 schemes

UK - FTSE 100 companies’ pension schemes have lost £63bn (e102bn) since the start of the year taking their overall pension fund deficits to £59bn (e94bn), according to research carried out by actuarial consultant UBSL. The figures greatly exceed other recent estimates.

Falling Double-A rated corporate bonds and negative stock market returns during the first three quarters of this year could result in many final salary schemes seeing their funding positions worsen by as much as 23%, says UBSL. The resulting £59bn shortfall is equivalent to the market capitalisation of the bottom 30 companies in the FTSE 100.

The figures are significantly worse than those reported in August by UBS Warburg, which put the shortfall at £28bn for FTSE 100 companies. Consultant Watson Wyatt also released figures in August claiming nine in ten UK schemes to be in deficit.

Watson Wyatt estimated the total deficit in UK company schemes under the accounting standard FRS17 to be £70bn. With UBSL’s figures, this would mean that over 84% of the total deficit in UK company schemes is accountable by the FTSE 100 companies.

“We are approaching year end, and FRS17 companies will have to disclose their pension fund liabilities. If shortfalls really are as bad as we think, companies may be forced to close their final salary schemes”, says Rob Dales, actuary at UBSL.

Trades unions have recently been applying pressure to companies to reinstate final salary schemes. Employees of UK steelworks Caparo succeeded in having their final salary scheme reinstated when they became the first to take strike action to protect their pension rights in the summer.

But warns Dales: “if company balance sheets show that contributions cannot be afforded, then unions will be fighting a losing battle.”

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