UK FTSE 350 Plan Sponsor Pension Liabilities Soar
02 July 2012 (PLANSPONSOREurope.com) - UK plan sponsor pension liabilities have now reached 35% of combined market capitalisation, according to data from Aon Hewitt.
The data reveals liabilities of the FTSE 350's final salary pension schemes, have increased significantly over recent months due to rising pension scheme liabilities while equity markets have remained at relatively low levels. The rise in pension scheme liabilities is largely due to the extremely low gilt yields.
The FTSE 350 pensions accounting deficit stood at £77bn at 30 June 2012, an increase of 40% since the start of most companies’ accounting year (31 March 2012) and up from £20bn at 31 March 2011. The FTSE 350 aggregate pensions accounting liability was £570bn at 30 June 2012 (up from £473bn at 31 March 2011), while the market capitalisation of the FTSE 350 on the same date was £1,623bn (down from £1,768bn at 31 March 2011).
Marcus Hurd, principal & actuary at Aon Hewitt, said: "When we look at the figures, it's evident why final salary pension schemes are posing such financial headaches for their sponsors. When the final salary pension scheme liability is over a third of the FTSE 350's market capitalisation, there's no wonder that small changes in pension schemes are having a disproportionate effect on the sponsor's finances.
“Pension scheme liabilities have increased by 18% since March 2011 while the market capitalisation of the FTSE 350 has actually fallen. It is the rising liabilities of these pension schemes that are causing the pain."