UK - Markets will have to rise by at least 33% to eliminate the FRS17 deficits for FTSE100 companies, research from Lane Clark & Peacock shows.
Its latest survey of FTSE100 scheme deficits found that over the 12 months to the end of July, the aggregate FRS17 deficit dropped from £55bn to £42bn due to higher equity returns and increased pension contributions.
Despite the improvement, LCP estimates that the FTSE100 index will have to rise to 5900 – a 33.5% increase – to erase FRS17 deficits. The consultant also warns that deficits could increase again as some companies may not be using the latest life expectancy figures.
If these are factored in, LCP estimates that the combined FTSE100 deficit could soar by £20bn.
The consultant also found that the trend to underfund schemes has been reversed, as many companies have “significantly” boosted their contributions. FTSE100 contributions for the year to July stood at a combined total of £10bn, exceeding the £6.6bn cost of benefits.
LCP partner Chris Tavener said: “The improvement in pension deficits has come at a big price for some blue-chip companies and it’s difficult to see companies sustaining these increased levels of contributions in the future.
“It will be a question of who is more important: the shareholders or the scheme members?”
This week's top stories included Cardano announcing plans to acquire Now Pensions from a Dutch pension fund later this year.
Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.
Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point