EUROPE - Corporate-sponsored European pension funds are more underfunded than their US counterparts, according to JPMorgan Asset Management's seventh annual white paper on the funding of pension plans.
Jens Schmitt, head of European Institutional Business at JPMorgan Asset Management said: "US pension funds have a better funded ratio of approximately 12%.
"Even though the regulatory differences make the comparison difficult, it shows that European corporations will need to extract more of their funding from their operating cash flows than their US peers".
This is despite the fact that contributions from European corporations were up by e10bn in 2005 compared to 2004.
Within Europe, Swiss corporate pension plans were the best funded with an average asset-to-liability ratio of 85%, while German plans were the least well funded with just 50%, the survey found.
Returns for 2005 were described as "strong" (up 12.3%), making it the third year in a row with positive returns.
Speaking about 2006, Karin Franceries, head of the client solutions team at JPMorgan Asset Management warned: "Rising rates have finally given some relief to pension fund finances - but there are challenges ahead.
If rates returned to the levels that we saw at the end of 2005, the sponsor of an average pension fund would need to double its average contributions to get to a fully funded status in five years."
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