The total deficit of FTSE 250 company pension schemes stood at £11 billion, as at 31 December 2011, a deterioration of £5 billion from the same time last year, according to research by JLT Pension Capital Strategies.
The research found that total deficit funding in 2011 was £1.5 billion, up from £1.2 billion in 2010.
Cable and Wireless and Taylor Wimpey led the way with net deficit contributions of £101 million and £122 million, respectively. Almost 50 other FTSE 250 companies also reported significant deficit funding contributions during 2011.
The research also found that the average pension scheme asset allocation to bonds has risen to 50%, a slight increase on 48% from 2010. In eight companies, pension scheme asset allocation to bonds has increased by more than 20%.
Only 75 FTSE 250 companies still provide more than a handful of current employees with defined benefit (DB) pension schemes. Of these, only 15 companies (just 6% of the FTSE 250) still provide DB pension schemes to a significant number of employees.
Charles Cowling, managing director at JLT Pension Capital Strategies, said: “This latest data further underlines the precarious situation most companies now find themselves embroiled in.
“Changes in economic conditions and increasing life expectancy have contributed to the spiralling growth in pension liabilities. Crucially, there are a significant number of FTSE 250 companies where the pension scheme represents a material risk to the business.
“In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies has risen by £2 billion and the total deficit in pension schemes continues to grow at an alarming rate.
“Closing DB pension schemes to new entrants has clearly had little impact. This is why more and more trustee boards are moving towards a more risk-averse stance, protecting schemes from over-exposure to the stormy equity markets by buying corporate bonds in increasing numbers.
“However, there is still a demand for growth investments that will produce returns, while still mitigating risk, so schemes should be looking at diversified growth investments (DGF) to plug deficits.”
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