UK - Pension deficits at the 94 FTSE100 firms that have final salary schemes total £333bn, a report from investment bank JPMorgan claims.
And it warns of further possible problems ahead.
Its latest report - Pensions: UK Company Exposure - says the three firms most at risk from soaring deficits under the FRS17 accounting standard, are British Airways, BAE Systems and ICI.
British Airways has a £1.6bn deficit, which is 68% of its market cap of £2.4bn. The BAE Systemsí shortfall is £3.1bn - or 52% of the company’s £6bn value - while ICI has a £1.1bn deficit, representing 43% of its £2.6bn market value.
The report found that the 94 firms it researched recorded deficit increases of 11% since 2002, while pension assets grew by 17% for the same period.
JPMorgan accounting analyst Sarah Deans said investor concern over pension deficits had abated over the last 18 months due to the market recovery, but warned that imminent changes should put pensions back in the spotlight.
These include the introduction of International Financial Reporting Standards and their effect on balance sheets; provisions in the Pensions
Bill which put more obligations on to schemes and new mortality projections which may leave pension liabilities “significantly understated”.
Deans said: “Changes in pension accounting in 2005 are likely to result in many companies suffering a one-off hit to the balance sheet. And new legal changes are increasing the focus on pension deficits, particularly in relation to mergers and acquisitions.
“Current calculations of pensions liabilities may be significantly understated due to the life expectancy assumptions used.
“This is a further risk to companies with large and mature pension schemes.”
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