According to research undertaken by the actuarial and pension consultants UBSL, FTSE 100 companies’ pension schemes have lost 63 billion since the start of the year, taking their overall pension fund deficits to 59 billion by the end of last month- a shortfall equivalent to the market capitalisation of the bottom 30 companies in the FTSE100. FRS17 will make these deficits subject to formal disclosure.
UBSl says that, with falling yields on AA corporate bonds and the FTSE All-Share Total Return Index falling 27 per cent since the start of the year, many final salary schemes could have seen their funding positions worsen by 23 percent over the course of the year.
“Boardrooms across the UK remain sceptical about FRS17 but it does give a realistic estimate of the true cost of final salary pension schemes,” says Rob Dales, Actuary, UBSL. “In the absence of dramatic improvements in stock markets, many FTSE companies could see their credit ratings fall following the publication of their results. As a result, the very markets that they need to access to repair their damaged balance sheets will charge them more to raise the money and may even, in some cases, be closed to them. Unions and employees fighting to keep their final salary pension schemes may find themselves fighting a losing battle when the full year disclosures are made early next year.”