Pension deficit pay-off alarm

Nearly a quarter of the biggest firms on the UK stock market will not have enough spare cash to pay off their pension deficits, the BBC reports.

A study by KPMG warns that pension scheme finance arrangements are now at ‘tipping point’ and 22% of the companies in the FTSE 100 share index will be unable to make the necessary payments.

The accountancy firm calculates that FTSE 100 firms are now paying as much into their schemes to pay off past deficits as they are paying in contributions for current staff.

Mike Smedley, pensions partner at KPMG, predicted that within five years £4 out of every £5 being paid in would be used to clear past deficits.

He said: “It is unprecedented for companies to be spending as much or more on their defined-benefit pension benefits for previous employees than for current staff.

“This is likely to result in more and more companies opting to close defined-benefit schemes altogether.”

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