FRS17 leaves top companies exposed
The FTSE 100 index would have to rise 50% by this time next year to clear the pension deficits of the UK's largest companies.
Link: FRS17 archive
A new survey from actuaries Lane Clark & Peacock found that the FTSE 100 would have to rise from the current index level of around 4,100 to at least 6,000, to clear the massive chasm in pension funds.
The actuarial firm estimates that FTSE 100 companies’ pension schemes exceed their assets by more than £55bn.
It names seven companies as ‘exposed to volatile movements in equities once FRS17 pension accounting rules are adopted’.
The seven firms named are Rolls-Royce, Royal & Sun Alliance, BT, BAE Systems, British Airways, ICI, and Invensys.
Among the companies covered by the report, BP showed the largest deterioration in the difference between scheme assets and FRS17 liabilities. BP moved from an FRS17 surplus of £1.5bn to a deficit of £3.4bn.
Of the companies to post results this year Boots has stood out as the only one to still enjoy a pension scheme surplus, having switched from equities into bonds two years ago.
Chris Tavener, partner at Lane Clark and Peacock said: ‘Without further substantial injections of contributions, some FTSE 100 companies will need a rally in the equity markets to reduce their pension deficits. The FTSE would need to climb to over 6,000 by this time next year to eliminate the estimated aggregate FRS17 deficit, but we haven’t seen the FTSE at that level for over two years.’