Retirement savers with guaranteed pensions from Britain’s private companies are £228 billion in the red, according to new research.
The defined benefit pension deficit has increased by £20 billion in the past 12 months, says JLT Employee Benefits, a financial consulting company.
Private sector pension breakdown
The figures come from scrutinising accounts supplied by the firms to shareholders and Companies House.
- For FTSE100 companies, the report found liabilities outbalanced assets by £69 billion in October 2015. The pensions schemes hold £537 billion in assets and £606 billion in liabilities and were 89% funded.
In October 2014, the figures showed the funding gap was £68 billion, with the FTSE100 company pension schemes having £527 billion of assets and £595 billion of assets. Funding was 89%.
- For FTSE 350 firms in October 2015, the deficit was £80 billion, the difference between the £606 billion of assets balanced against £686 billion of liabilities. Funding was at 88%.
The picture was much the same in October 2015, with FTSE350 companies in the red to the tune of £79 billion with £596 billion assets and £675 billion liabilities. Funding was 85%.
- For all private sector pensions in October 2015, the picture was they had assets of £1,226 billion and liabilities of £1,452 billion with a funding level of 84%.
A year earlier, the accounts showed assets of £1,194 billion and liabilities of 1,402 billion with an 84% funding level.
Companies pour billions into pensions
Charles Cowling, director at JLT Employee Benefits, said: “We have monitored the efforts companies are making to pump up the assets in their pension schemes, but they are making little progress.
“Companies such as Tesco have ploughed billions into their pensions and reviewed investment strategy but have still come up short of balancing the books in a time of reasonable investment return.
“The recent official statistics predicting today’s pensioners are likely to live longer do not help their efforts as they are likely to have to factor in extra pension payments to cover the cost.”
Cowling argues that the private pension deficit gap could widen due to economic pressures beyond the control of companies and their scheme trustees.
“If interest rates rise alongside market expectations, then liabilities could increase by £60 billion according to our calculations,” he said.