Concerns about the underfunding of pension funds in the UK's top companies as a result of the infamous accounting standard FRS17 have failed to materialise.Indeed new research has concluded that underfunding no longer threatens the future of companies.
Link: FRS17 special report
Contrary to popular belief, more than half of 200 British companies surveyed have either no deficit or could eliminate their fund deficit with the equivalent of less than 10 months’ profit.
Research by Aon Consulting, the pensions’ consultancy, found that 150 of the 200 companies polled have a pension fund deficit of less than half the average profits, estimated to be £720m.
The findings suggest that instead of a pension crisis caused under FRS17 most companies should be able to fund any shortfalls from future profitability.
Andrew Claringbold, principal actuary at Aon Consulting, said: ‘These findings are good news for employers and pension scheme members alike. While UK companies remain subject to ongoing financial difficulties due to their pension scheme, for most businesses they remain at a level that is manageable through additional contributions over time. For members, the figures demonstrate that pension schemes are perhaps more secure than they have been led to believe.’
FRS 17, due to take effect in 2005 for all listed companies, requires businesses to show pension fund assets and liabilities on the balance sheet for the first time.
The study looked at the disclosure of pension information of 200 of the largest UK companies, including the FTSE100 with defined benefit schemes, as well as a significant proportion of the FTSE250. The rest were listed with National Association of Pension Funds as having pensions fund assets in excess of £100m.