Big rise in pension contributions, but shortfalls sustain

Click to follow
The Independent Online

Companies paid almost twice as much into their pension schemes in the past year as they did in 2002 thanks to rising stock markets and profits, according to research by the consultant Watson Wyatt.

Companies paid almost twice as much into their pension schemes in the past year as they did in 2002 thanks to rising stock markets and profits, according to research by the consultant Watson Wyatt.

But the contribution boost has done little to affect the level of pension scheme deficits. Scheme liabilities have increased, and the annual deficit in the FTSE 100 is still £60bn.

Watson Wyatt found that, on average, contributions from employers had risen by 95 per cent. Chinu Patel, a partner at Watson Wyatt, said: "Company contributions are normally set following the three-yearly actuarial valuations and not the annual accounting calculations. However, concerns about growing deficits have had an impact on pension funding decisions.

"This came at a time of improved pre-tax profits for many companies, up 30 per cent on average over their 2002 levels, so companies could afford to, and have, paid in more."

A quarter of the increase in pre-tax profits of FTSE 100 companies in 2003 was used up by increased pension contributions, the research found.

Mr Patel said: "Even if companies continue to contribute at the new increased levels it will take many years before the deficits are eliminated unless there is a dramatic improvement in the stock markets without a knock-on effect on the corporate bond market or on inflation expectations."

Comments