BusinessCompany NewsFTSE100 face £20bn euro entry bill

FTSE100 face £20bn euro entry bill

Euro entry could cause FRS17 pension liabilities to soar by an extra £20bn on FTSE100 companies' balance sheets, a new report has warned.

Link: FRS17 special report

One of the effects of the UK joining the Eurozone would be using yields on Eurobonds, which are currently lower than their ‘sterling’ equivalents, which could increase FRS17 liabilities by about £20bn, it argued.

More positively the report, issued annually by Lane Clark & Peacock, found that the deficit in defined benefit pension schemes for the FTSE100 has decreased to £42bn, from £55bn a year ago.

Longer-living people could be bad news for companies that sponsor pension schemes, as current estimates for life expectancy are believed to be too low. In turn, another £20bn of additional FRS17 liabilities could appear on FTSE100 balance sheets over the next few years if these estimates are increased.

FTSE100 companies paid contributions of £10bn into their defined pension benefit schemes during accounting periods ending in 2003, double that of the previous year.

Ten FTSE100 companies reported FRS17 deficits in excess of 25% of their market capitalisation at their 2003 year-ends. The report suggested that such significant deficits could ‘deter corporate predators’.

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