FTSE 350 defined benefit pension deficits fall by £12 billion

The total deficit in the defined benefit (DB) pension schemes of the FTSE 350 stood at £90 billion at the end of June, according to research from Pension Capital Strategies.

This represents an improvement of £12 billion on the position a year ago.

Pension Capital Strategies’ report The FTSE 350 and their Pension Disclosures, explores the pension disclosures of the FTSE 350, as well as the steps taken to address the pension scheme deficits.

In response to the global financial crisis, deficit funding into FTSE 350 pension schemes increased 150% over the last 12 months, from £5.2 billion last year to £13 billion in the current period.

Despite the injection of £24 billion of deficit funding over the past three years, FTSE 350 pension schemes have moved from a total surplus of £7 billion to an overall deficit of £90 billion in the same period.

Seven FTSE 350 companies – Royal Dutch Shell, Unilever, Lloyds Banking Group, National Grid, BAE Systems, British Airways and GlaxoSmithKline – have each paid more than £1 billion of deficit funding into their pension schemes during the last three years.

There has also been a large decline in DB pension provision, which has fallen by almost a third from £9.4 billion in 2007 to £6.7 billion in the latest FTSE 350 accounts.

At 30 June 2010, there were 31 FTSE 350 companies that have disclosed pension liabilities greater than the total equity value of the company, and eight FTSE 350 companies have now disclosed pension liabilities valued at more than twice the company equity value.

Charles Cowling, managing director at PCS, said: “Pension liabilities continue to dominate decisions at board level. Unsurprisingly, given the challenges in the global economy, an increasing number of companies are taken steps to close down their final salary pension schemes.

“The considerable drop in provision for DB benefits is further evidence of our continuing belief that, for the private sector, the golden age of final salary schemes is over.”

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