FTSE 350 pension deficits nearly double since end of 2011

Pension scheme deficits among FTSE 350 companies have nearly doubled since the end of 2011 to £90 billion in May 2012, according to research by Towers Watson.

Its Defined benefits pension schemes: the impact on FTSE 350 company accounts at 31 December 2011, analyses the financial reports of 192 FTSE 350 companies.

The research also found the total pension deficit for all FTSE 350 companies was estimated to have been £49 billion both at the end of 2010 and at the end of 2011. In between, however, it rose to £81 billion and fell to just £4 billion.

Inflation assumptions about the size of the gap between the retail prices index (RPI) and the consumer prices index (CPI) varied from 0.5% and 1.2%. The most common assumption was 1%, adopted by 37% of FTSE 350 companies.

Neil Crombie, a senior consultant at Towers Watson, said: “Market prices provide few signposts to the future gap between RPI and CPI inflation.

“Instead, companies have to think about whether the goods in one basket will increase in price more quickly than those in another, and how much impact using different formulae to calculate the two measures might have.

“There is a lot of uncertainty, but all companies in this report, said their best estimate is that the gap between CPI and RPI will be smaller than suggested by official projections.”

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