Although the retirement dreams of tens of thousands of workers may be at risk as pension funds bomb, other investors are also in financial danger.
Britain’s biggest companies have pension black holes that need almost £600 billion shovelling in to fill.
The worry is the debt is just too much and the FTSE listed firms holding the millstone will eventually collapse under the strain.
But pension deficits are a double-edged sword.
While workers and their pensions stand on once side, investors staking their savings and expecting dividends in return stand on the other.
Pensions v dividends
The sad fact is if the pension deficits are to shrink, companies will have to cut dividends to fund them.
That could see investors fleeing them to protect their wealth.
The FTSE has 11 companies with deficits of 17% or more above their market capitalisation.
These are the companies that could see investors desert if they start to cut dividends, but they are also the companies owing the most to pension schemes.
Construction and engineering giant Carillion tops the table with a massive 37% over market cap deficit.
Travel agents Thomas Cook (30% over market cap), and engineers BAE and GKN (Both 29%) make up the top three places.
Brewer Mitchell and Butler’s is next (27%), a nose ahead of material specialists Morgan Advanced Materials (26%).
Uneasy relationships
Road and rail firm First Group (24%), Tesco (22%), professional consultants WS Atkins (19%) take the remaining places, with the AA and BT sharing the bottom position (17% each).
Other factors may affect a company’s ability to fund their pension deficits.
Many FTSE companies generate huge revenues each year, from which they can fund pensions and dividends.
But should those revenues start to fall, they will soon expose an uneasy relationship between income and liabilities.
The smart money suggests looking at pension deficits before investing to make sure directors will not have to cut payments to shareholders in the future to control the money they are burning as pension shortfalls.
Simon McGarry, senior equity analyst at Canaccord Genuity Wealth Management, who looked at FTSE pension deficits, warned they represent an unexploded bomb in investment portfolios.
