UK - UK pension deficits could be as high as £100bn for the FTSE100, according to a report published by investment bank Dresdner Kleinwort Wasserstein.
The report – ‘More pension tension: Management reaction or inaction?’ – also found that shortfalls for the 185 companies in the FTSE EuroTop 300 offering funded plans may be as much as US$270bn (£168bn).
DrKW stressed that companies should be reducing pension scheme risk by moving from equities to bonds, but admitted that many will be looking for an equity market rebound to solve their pensions problems.
The DrKW report stated: “It seems obvious that companies should reduce pension risk by increasing bond exposure.
“However, this move may be delayed in a desperate attempt to justify overly-bullish return on asset assumptions for pension plans.”
DrKW said that the implied equity return in pension schemes is around 9.5% – a figure that they believe is far too high.
But if firms start to lower this rate to more realistic levels, of around 4% to 5% in the case of bonds, they will have to increase pension fund contributions substantially.
“If assets are assumed to grow much faster than the liability, then less cash is needed today. Drop that return and near-term contributions rise.”
The Conservative Party has leapt on these figures as proof of the damage that the government has done to occupational pension schemes since it came to office.
Conservative work and pensions spokesman David Willetts said: “The problems started with its £5bn a year tax-on-pensions in 1997 and have continued right through to the cuts in national insurance rebates this year.
“Gordon Brown’s tax raid on pensions not only fuelled the crisis, but it also contributed to falls in the stock market.”
He said: “This is just more evidence that millions of today’s workers will retire with far less than they were expecting.
“Labour has failed to address the scale of the pensions crisis.”
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.