Germany, Spain and the UK have
the biggest pension deficits in
Europe, according to actuarial consultants
Lane Clark & Peacock (LCP). Their
combined European pension deficit
comes in at €116bn.
The average corporate pension
deficit in Germany increased 1% in
2004, while in Spain pension expenses
dropped 1%, LCP found in an annual
The UK corporate pension liability
fell to €37bn, helped by better equity
returns and “record levels of contributions”.
According to LCP analyst and report
co-author Chris Tavener, equity
returns alone could wipe out the UK
pension deficit in one year, if the FTSE
100, which has risen 20% in the last
year, went up 30%. “It would be surprising
and it would be good news,”
he says.
The report suggests that if an average
FTSE 100 company went bankrupt,
as much as £300m (€438.8m) of
pension liability would be likely to fall
on the Pension Protection Fund,
which could only count on £150m
raised via its flat rate levy.
But he believes this would be
unlikely for a FTSE firm.
Switzerland saw the largest rise in
average deficits, rising from €521m in
2003 to €931m. Finland halved its
average deficit from €122m in 2003
to €54m.
LCP says the level of deficit disclosure
varies greatly among the countries.
But it adds that next year’s
report could be more straightforward
because of EU laws requiring harmonisation
in line with the International
Financial Reporting Standards (IFRS)
by the end of 2005.
❏LCP partner Bob Scott commented
on the changing role of trustees in the
UK in view of the implementation of
the EU directive on pension scheme
funding in September.
The number of independent and
professional trustees is expected to
rise as the directive requires schemes
to be funded up to the value of “technical
provisions”‚ which will empower
trustees to demand higher contributions
of the sponsor.
Trustees who also act as financial
directors will be asked to “decide what
hat they are wearing” during funding
negotiations between trustees and a