A ‘long, hot summer of pension problems’ is in prospect with little hope of early resolution to the problems of pension deficits that have remained largely unchanged over the past 18 months, experts have warned.
Companies and trustees need to face up the realities of those deficits and to start considering new ways of tackling them, said HR consultancy Hewitt Associates.
Hewitt estimates that the aggregate pension deficit for FTSE100 companies has only improved slightly since the beginning of 2004 and, at the half-year point of 2005, remains at about £50bn-£60bn.
Raj Mody, pensions consultant at Hewitt Associates, said: “Investment returns are not resolving pension black holes and additional cash contributions are not affordable in many cases: a quarter of companies need extra contributions equivalent to a full year’s profits – and more than 10% of companies need over three years’ profits.
“Other options need to be considered and action must be taken. Neither employers nor trustees can allow the situation to drift and broader financing deals need to be negotiated.”