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Channel4.com: Pensions £36bn ‘black hole’ shown

EXTRACT: The highest contributions were paid by HSBC at £1.3 billion and Royal Dutch Shell at £702 million.

THE ARTICLE

The black hole in the UK’s largest company pension schemes stands at £36 billion, a study has shown.

Volatile markets pushed the deficit as high as £54 billion in January before it plummeted to £29 billion in April and settled at £36 billion in July – broadly the same as this time last year, the study by actuarial consultants Lane Clark & Peacock found.

Company contributions have risen to record levels – £12.5 billion in 2005, up 12% on the previous year, the survey also found.

The highest contributions were paid by HSBC at £1.3 billion and Royal Dutch Shell at £702 million.

Only five companies in the FTSE 100 reported a pension scheme accounting surplus. These were Associated British Foods, Gallaher Group, Johnson Matthey, Old Mutual and Schroders.

Charlie Finch, consultant at LCP said: “The Pensions Act 2004 and associated legislation encourages companies to accelerate the funding of their pension deficits.

“Although the new legislation makes it more likely that pension scheme members will receive their promised benefits, the price could be more scheme closures as companies are forced to commit cash to funding their deficits instead of paying benefits for current employers.”

On Tuesday, department store chain Debenhams confirmed it is to close its final salary pension scheme to both new and existing members.

The controversial decision followed 18 months of negotiations with the scheme’s trustees.

And support services group Rentokil angered unions in December when it became the first FTSE 100 Index to close its final salary schemes to existing members.

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