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Last Updated: Wednesday, 28 June 2006, 13:12 GMT 14:12 UK
Employers reduce pension deficits
BA News
How BA announced plans to inject 500m into its pension fund
Large companies whose pension schemes are in the red are working harder to plug them with extra payments, a report has found.

Actuarial firm Mercer surveyed more than 100 firms, and found that 60% made extra pension contributions in 2005.

The main reason, it said, was a new legal requirement to reduce any deficit - typically within 10 years.

More than half have also assumed their staff will be living longer, which has increased the cost of their schemes.

Late last year, the Pensions Regulator estimated that British companies would have to pay an extra 130bn extra into their pension schemes over the next decade to eradicate their deficits.

"It is interesting that scheme-specific funding was the primary reason why companies made additional pension contributions last year, as the relevant legislation was technically not in effect, but clearly having an influence," said Tim Keogh of Mercers.

"This year we are likely to see more companies following suit."

The pressure on employers to do something about holes in their schemes was demonstrated by the fact that 12% of companies in the survey took special measures to finance the extra payments, for instance by taking out a special loan.

Extra contributions

In recent months there has been a noticeable jump in the number of big employers taking similar steps to improve the finances of their pension schemes.

Among them have been Sainsbury's, British Airways, BAE Systems, the drinks firm Diageo, Rolls Royce, Reuters, Lloyds TSB and most recently the Bank of England.

The government has also pledged an extra 1.75bn to help shore up the pension fund at the Royal Mail.

In the private sector, the payments have often formed part of a larger plan to close the schemes to new members or reduce the benefits that may be accrued in the future by existing members.

In April the Pensions Regulator estimated that UK occupational pension schemes had a collective deficit of between 300bn and 400bn.

At the time, it warned that between 150 and 300 large schemes were at risk and being actively investigated.

In the last year or so, a small number of firms have said the requirement to top up their schemes has forced them into insolvency.

Among them have been car parts maker AP Leamington, construction firm Dew Pitchmastic and leather manufacturer Pittards.




SEE ALSO
Bank moves to close pensions hole
23 Jun 06 |  Business
Lloyds TSB to inject pension cash
19 Jun 06 |  Business
BAE seeks to fill pension deficit
13 Jun 06 |  Business
Reuters to top up pension funds
24 May 06 |  Business
Royal Mail gets 1.75bn package
18 May 06 |  Business

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