UK - Pension scheme deficits at Britain's biggest companies have soared in the past year from £200m to £85bn, new research shows.
Morgan Stanley says the combined FRS17 deficit for all companies in the FTSE100 stood at £65bn at the start of the year.
But massive falls in markets worldwide have added an extra £20bn since then, the investment bank calculates.
The figure is equal to 10% of the total market capitalisation of companies in the FTSE100.
Morgan Stanley’s research found the market falls have had a disproportionate effect on large companies and that some scheme deficits have grown to such an extent that they dwarf the sponsors’ total market capitalisation.
Rolls-Royce’s £1.8bn deficit is approximately 2% larger than its total market capitalisation, BAe System’s deficit is worth 82% of the firm’s total value, while British Energy’s £505m deficit is nearly 16 times larger than the firm.
Morgan Stanley analyst Leon Michaelides said these companies, and others with deficits that were large in relation to their market capitalisation, would have to increase contributions “significantly”.
Smith & Williamson Pensions Consultancy director Mike Fosberry was less pessimistic.
“We are looking at long-term funds and surely looking at today’s position is not indicative of the future, “ he said.
“Many pension funds had the same investment issues in the early 70s but traded through them and within 10 years were running large surpluses.
“Who is to say this will not happen again?”
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