EUROPE - Germany, Spain and the UK have the biggest pension deficits in Europe, according to actuarial consultants Lane Clark & Peacock.

The combined European pension deficit comes in at €116bn, LCP says.

The average corporate pension deficit in Germany increased 1% in 2004, while in Spain pension expenses dropped 1%, LCP said in an annual survey.

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 told IPE.

The report suggests that if an average FTSE 100 company went bankrupt, as much as £300m 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 said 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 said the level of deficit disclosure varies greatly among the countries. But it added that next year 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.

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 company.