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FTSE pensions debt tops 55bn

By Ian Cowie, Daily Telegraph

 August 6, 2003

FTSE 100 companies' pension scheme liabilities exceed their assets by more than 55 billion, according to an analysis of their accounts under the tough new FRS17 standard.

Actuaries Lane Clark & Peacock said the FTSE 100 index would have to rise to more than 6,000 by this time next year to clear the pension fund deficits of the companies whose shares comprise that index.

Increased taxation, falling share prices and rising bond prices have hit pension funds hard, particularly final salary or defined benefit schemes.

Of the 90 companies in the FTSE 100 with final salary funds, only 13 showed a surplus of assets over liabilities last year. Of these, 11 have reported this year, but only one - Boots - still enjoys a surplus. Boots' pension scheme switched entirely out of shares and into bonds while the FTSE 100 index stood above 6,000 more than two years ago.

At the other extreme, the actuaries name seven companies which they claim are "looking exposed to volatile movements in equities once FRS17 pension accounting rules are adopted".

They are BAE Systems, British Airways, BT, ICI, Invensys, Rolls-Royce, and Royal & SunAlliance. The actuaries calculate that Rolls-Royce's pension fund shareholdings are worth 50pc more than Rolls-Royce's market capitalisation.

Chris Tavener, of Lane Clark & Peacock, said: "Without substantial injections of contributions, FTSE 100 companies need a rally in equity markets to reduce their pension deficits."

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