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06 May 2015

UK´s Biggest Organisations Urged To Boost Pension Contributions

As the deficit continues to soar, advisers are warning that some of the biggest companies in the UK could face pressure to increase their pension contributions, the Financial Times reports.

With some 30 FTSE 100 companies set to embark upon a financial health analysis of their defined benefit pension schemes, it has become apparent that deficits have skyrocketed since the last assessment three years ago.

In fact, according to figures from JLT Employee Benefits, despite signs of economic improvement the deficit for FTSE 100 pension schemes rose by 48% year-on-year to the end of 2014, when it reached £80bn - £26bn more than the same time one year before.

Commenting on the news, JLT´s director Charles Cowling explained that: “The lower gilt yields go the bigger scheme deficits tend to grow.

“Three years ago we thought interest rates were low and it was a bad time for markets, but it´s just got worse.”

Some of the organisations due to be evaluated this year include Aviva, Shell, BP, British Airways, and banks HSBC and Lloyds. Bosses will come together with trustees to form a recovery plan aimed at helping to fill in any funding deficit.

But Cowling predicts that these negotiations are likely to be “difficult,” and that “inevitably there are going to be demands for (potentially significant) increases in employers´ funding contributions as pension scheme deficits continue to grow.”

JLT´s research shows that over the last financial year, FTSE 100 businesses paid over £14bn into their pension schemes; significantly less than the £16.3bn previously. And as new pension benefits built up, just £6.9bn of this total was spent on cutting deficits.

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