UK - The total deficit in FTSE 100 pension schemes could add up to more than £100bn due to companies underestimating future life expectancy by between two and four years, according to Pension Capital Strategies (PCS).
The risk management and recovery adviser published its quarterly report on FTSE 100 companies pension disclosure.
PCS claimed that although the total deficit was an estimated £46bn, companies were underestimating the impact of improvements in longevity. This led to a conclusion that the real deficit among the FTSE 100 companies could be over £100bn.
BAE Systems registered the largest deficit of £5.3bn while ICI, British Airways, BT, Royal & SunAlliance and Corus also had pension shortfalls greater than their equity market value.
The PCS report showed the disclosed pension liabilities of the FTSE 100 companies grew by £52bn to £407bn in just 12 months.
The fact that the average allocation to bonds was 34% indicated that companies were failing to address the mismatch of their assets and pension liabilities, according to the report.
Charles Colwing, managing director, PCS, said: "While many companies are making significant changes in managing their pension schemes, there are still some major structural problems.
FTSE 100 companies do not fully recognise the impact of improving longevity and the significant mismatching of assets to pension liabilities and are therefore taking an inefficient approach to the funding of pension scheme deficits."
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