UK Pension Deficits; The Losers...
A new study by JLT Employment Benefits found that twenty firms now in the FTSE 250 have pension deficits that dwarf their market value with Southern Rail owner Go-Ahead’s liabilities almost four times the value of their business. ‘The number of firms that could be dragged down by their pension liabilities is significant’ said Charles Cowling, the director of JLT. He referred to 26 companies with pension liabilities of more than a billion, the largest being bus operator FirstGroup with disclosed pension liabilities of over £4 billion.
The top companies that are most under pressure from pension deficits are:
First Group : £4.9 billion in liabilities against a market capitalization of £1.3bn
International Airlines Group : £20.4bn in liabilities against a market capitalization of £10bn
BAE Systems : £29bn in liabilities against a market capitalization of £16bn
Pheonix Group : £3.7b in liabilities against a market capitalization of £2.1bn
Royal Bank of Scotland : £35bn in liabilities against a market capitalization of £26bn
Morrison Supermarkets : £50.4bn in liabilities against a market capitalization of 43.7bn
Increasing life expectancy and changes in economic conditions - notably record low interest rates - have caused liabilities to grow, with a study by PwC last September showing that UK Plc’s total deficit now stands at £710bn, the biggest level ever.
A number of companies have been closing their final-salary or defined benefit pension schemes in favour of a defined contribution scheme, with JLT noting that just 13 companies in the FTSE 250 are still providing defined benefit packages to a significant number of employees.
Concerns around pensions have swelled following recent crises at BHS and Tata Steel, with MPs on Friday accusing Sir Philip Green of "favouring" the pension schemes in his Arcadia Group - where the pension deficit soared to £565m last year - over the retirement fund at BHS.
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