Companies set to report widening pension deficits

Companies preparing their accounts for corporate years ending 31 December could be set to report widening pension deficits, according to consultancy Towers Watson.

It estimates that, since the end of 2010, aggregate pension deficits in FTSE 100 companies’ accounts have grown from £40.9 billion to £48 billion.

John Ball, head of UK pensions at Towers Watson, said: “Higher bond prices and fresh contributions mean FTSE 100 companies’ pension assets are worth more now than they were 12 months ago, despite equities losing value in 2011. However, assets have not kept pace with rising pension liabilities. When interest rates are low, bigger liabilities must be recorded in company accounts.

“The precise picture will vary a lot from company to company depending on how the scheme’s assets are invested and how soon its pensions have to be paid.”

Towers Watson estimated the aggregate assets and liabilities in FTSE100 companies’ defined benefit pension schemes at 31 December 2010 and at 28 December 2011.

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