Barnett Waddingham research: FTSE 350 pension scheme deficits were down in 2010

The aggregate pension scheme deficit for FTSE 350 organisations was £48.3 billion in 2010, down from £58.1 billion the previous year, according to research by Barnett Waddingham.

The research, Impact of pensions schemes on UK business, which collected data from the 221 FTSE 350 organisations, that have a defined benefit (DB) pension scheme, found that these firms are currently paying around £11 billion per year to clear these deficits.

Additional findings include:

  • Contributions to DB pension scheme deficits exceeded free cash flow for 29 firms in the FTSE 350 over the past 12 months.
  • 73 organisations are paying higher deficit contributions per employee then the contributions for future pension provision.
  • Firms in the FTSE 350 have total pension scheme assets of £434 billion.
  • Over 25 firms had pension liabilities that exceed the market capitalisation of the organisation.
  • 14 firms had an equity holding in their scheme that was more than 50% of the market capitalisation of the organisation.

Nick Griggs, head of corporate consulting at Barnett Waddingham, said: “Our research shows the widespread impact DB schemes are having on the businesses of some of the UK’s largest organisations.

“A small number of high-profile companies are often highlighted for the size of their DB pension obligations but our research shows the significance of DB pensions to a much wider group of firms.

“The research also shows the generational divide that will materialise in the future as many of the UK’s largest employers are now paying more per annum to plug DB scheme deficits than they are to fund the benefits earned by current employees each year.

“Organisations are directly exposed to significant risks through their pension scheme. Our research highlights the strain that deficit contributions can place on firms when these risks materialise particularly at times, like 2009 and 2010, when, for many firms, cash flow has been tight.”

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