Top UK firms face pensions shortfall of £150bn

Top UK companies could be facing a £150bn pensions shortfall, three times the previous estimate, according to actuaries.

Research prepared for the Pensions Board, which advises the government on behalf of the actuarial industry, found that FTSE 100 companies had significantly underestimated the costs of ‘buying out’ their pensions liabilities.

Estimates of present liabilities are based on the current FRS17 accounting rules, which put the present pensions shortfall at £50bn.

James Fraser, head of LEK Consulting’s financial services practice, told the Financial Times that the aggregate deficit of the FTSE 100 companies could be as high as £150bn.

“Many pension funds still do not take full account of potential future improvements in longevity in their valuation, in spite of the fact that life expectancy has been improving since the Middle Ages,” Fraser said.

However, considerable differences of opinion remain in the size of the pensions black hole.

Last week HR consulting firm Mercer said the deficit grew by 24% last year, from £75bn in 2004 to £93bn in 2005.

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