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20/08/2001
Pension scheme under-funding among FTSE 100
A growing number of the largest pension schemes in the UK are under-funded, according to the results of an annual study of company accounts being published this week by Bacon & Woodrow.
The study of companies in the FTSE 100 reveals that a wide variation in the funding levels of pension schemes exists, and 17 schemes report a funding level of less than 100 per cent compared to seven last year. In one instance, the size of the deficit is nearly £170 million.
More positively, 83 schemes report scheme funding levels in excess of 100 per cent, including 20 reporting a funding level of 125 per cent or more, up from 14 schemes last year. With regard to pension scheme costs, the study reveals a slight decrease in costs compared to last year.
Commenting on the level of under-funding, Brian Wilson, Head of Benefits Research at Bacon & Woodrow, said: "Falling interest rates and increasing longevity are hitting defined benefit pension schemes hard, and low or negative returns on pension fund assets are compounding the problem.
“Under the current accounting standard SSAP24, the funding position shown does not have to reflect fully the position at the balance sheet date and the assumptions adopted can be very diverse.
"As the new accounting standard FRS17 is introduced over the next three years, companies will have to show not only up-to-date figures but also figures which have been calculated using a common method and market-based assumptions.”
Mr Wilson added that it was likely that future years' disclosures would paint a more negative picture of pension scheme funding than seen this year. (CD)
The study of companies in the FTSE 100 reveals that a wide variation in the funding levels of pension schemes exists, and 17 schemes report a funding level of less than 100 per cent compared to seven last year. In one instance, the size of the deficit is nearly £170 million.
More positively, 83 schemes report scheme funding levels in excess of 100 per cent, including 20 reporting a funding level of 125 per cent or more, up from 14 schemes last year. With regard to pension scheme costs, the study reveals a slight decrease in costs compared to last year.
Commenting on the level of under-funding, Brian Wilson, Head of Benefits Research at Bacon & Woodrow, said: "Falling interest rates and increasing longevity are hitting defined benefit pension schemes hard, and low or negative returns on pension fund assets are compounding the problem.
“Under the current accounting standard SSAP24, the funding position shown does not have to reflect fully the position at the balance sheet date and the assumptions adopted can be very diverse.
"As the new accounting standard FRS17 is introduced over the next three years, companies will have to show not only up-to-date figures but also figures which have been calculated using a common method and market-based assumptions.”
Mr Wilson added that it was likely that future years' disclosures would paint a more negative picture of pension scheme funding than seen this year. (CD)
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