UK’s biggest companies face summer of woe over pensions

UK’s biggest companies face summer of woe over pensions

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tesco

Tesco is one of the FTSE 100 companies currently going through a triennial health check on so-called defined benefit pension schemes CREDIT: NICK ANSELL

Some of Britain’s largest companies including Lloyds and Tesco may be forced to boost pension contributions this summer as deficits balloon.

As much as a third of the FTSE 100 is currently going through a triennial health check on so-called defined benefit pension schemes, with JLT Employment Benefits warning that firms are likely to face a surge in deficits compared to their last valuations three years ago.

GlaxoSmithKline, BAE Systems, and Standard Life may also face having to shore up growing deficits.

While deficits have risen in the last decade due to low interest rates, JLT said that this year was “plagued” by fresh problems with quantitative easing, political uncertainty and the fall in sterling following the Brexit referendum expected to accelerate the fall in deficits and the demand for pension contributions.

British Airways
British Airways owner International Airlines Group has pension liabilities bigger than its equity market value. CREDIT: TOBY MELVILLE

Charles Cowling, the director of JLT, warned that businesses now going through these financial checks – which are a part of how pension schemes are managed – will face difficult conversations in the coming months.

“Those negotiations will be starting to happen now and this tension between dividends and cash into pension schemes is going to be a hot topic in debate at boardrooms in the next few months,” he said.

“The difference in the last five to 10 years is that before you were discussing surpluses.  “These days it’s deficits, which keep getting bigger.”

The total deficit in FTSE 100 pension schemes was estimated to be £105bn at the end of September, with eight companies – most notably British Airways owner International Airlines Group – having pension liabilities bigger than their equity market value.

[“Source-telegraph.”]