Rising Pension Deficits Could See Trustees Demand More Cash to Shore Up Losses; FINANCE
Soaring pension deficits may lead to pension trustees demanding more cash, KPMG has said.
But companies struggling in the down turn may need the funds just to keep the business going, the firm added.
Official figures released by the Pension Protection Fund showed that the collective deficit of over 7,800 defined benefit funds in its sample rose from pounds 136 billion in November 2008 to pounds 194.5 billion by the end of the year, based on actuarial assumptions for 179 valuations. And the total deficit of schemes in deficit rose to almost pounds 210 billion, an annual increase of pounds 143bn Separately, a recent KPMG analysis revealed that the FTSE350 Pension Scheme assets lost pounds 150 billion during 2008.
David Fripp, head of pensions at KPMG in Birmingham, said there was a substantial risk that companies could see demands for cash to pension schemes increase dramatically as anxious pension fund trustees seek to shore up the losses.
But this may not be the best use of the company's cash, he added, saying it might be more appropriate for companies to decrease pension scheme contributions to protect the business by improving liquidity. …