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UK Pensions '£100bn in the red'
March 4, 2003
UK companies are wildly
over-estimating the value of their pension funds, investment bank Dresdner
Kleinwort Wasserstein (DKW) has warned.
The bank suggested the UK's top
100 companies could have a combined pension shortfall of £100bn.
DKW blames the problem on overly
optimistic assumptions about company investments in the stock market which
have hidden the true extent of the black-hole.
And it warned that a number of
firms will be forced to cut dividends and reduce their spending plans in
order to top-up their funds.
Nick Seaward, head of the
equities liaison team at DKW, told BBC Radio 4's Today programme that the
cumulative pension fund deficit of the UK's FTSE 100 companies could be as
much as £100bn.
"The problem has been that
they've been assuming a much more optimistic return on their assets and
pension funds in the last three years than has actually been
happening," said Mr Seawood.
"They've been assuming a
10%-15% growth in the value of their fund.
"We think a realistic
return would be more like 5.4%"
Mr Seawood used the example of
the engineering group GKN, which yesterday reported strong operating
"Most of that is being
wiped out by the top-up they're going to have to make to their pension
fund this year," warned Mr Seawood.
He suggested the group would be
forced to inject about £53m to sustain its pension fund this year,
compared to a top-up of £33m in 2002.
And the jet engine maker Rolls Royce warned on Tuesday that its pension fund deficit had reached £1.1bn.