The total pensions deficit of the UKs leading 250 companies increased from £5bn to £11bn last year, despite the injection of £1.5bn to close pensions deficits, according to figures published by JLT Pension Capital Strategies Limited today.
JLT's research also found that the total disclosed pension liabilities of the FTSE 250 rose from £67bn to £69bn over the course of 2011, with 18 companies disclosing liabilities in excess of £1bn.
Software manufacturer Invensys had the highest disclosed liabilities, of £5.452bn - equivalent to 320% of the company's equity market value and giving it a pension deficit of £428m.
Travel firm FirstGroup had the next biggest disclosed liabilities - £3.420bn - followed by insurance provider Phoenix Life (£2.995bn), engineering services company Babcock International (£2.795bn) and construction firm Balfour Beatty (£2.785bn).
Charles Cowling, managing director at JLT, said: 'This latest data further underlines the precarious situation most companies now find themselves embroiled in.
'Changes in economic conditions and increasing life expectancy have contributed to the spiralling growth in pension liabilities. Crucially, there are a significant number of FTSE 250 companies where the pension scheme represents a material risk to the business.'
The £1.5bn deficit funding seen last year represented an increase from £1.2bn in 2010, with Taylor Wimpey and Cable & Wireless making the biggest individual net deficit contributions of £122m and £101m respectively. Another 46 FTSE 250 companies also reported significant deficit funding contributions during the year, generally equal to over £10m of surplus funding each.
JLT also found a continued decline in defined benefit pension scheme provision by the FTSE 250, with only 75 companies still providing DB benefits to more than a handful of current employees and only 15 firms doing so for a significant number of their workers. The underlying reduction in open DB schemes is 10% over the past year.
Mr Cowling said the continued closure of DB schemes had failed to impact on rising deficits. 'This is why more and more trustees boards are moving towards a more risk-averse stance, protecting schemes from over-exposure to the stormy equity markets by buying corporate bonds in increasing numbers.
'However, there is still a demand for growth investments that will produce returns, whilst still mitigating risk, so schemes should be looking at diversified growth investments to plug deficits.'
The research found that the average FTSE 250 pension scheme allocation to bonds increased slightly last year - from 48% to 50%. JLT said this was part of a larger trend for firms to move away from equities as they look to de-risk their schemes. Bond allocation has increased by 8% over the last three years, and eight of the FTSE 250 have increased their asset allocation to bonds by more than 20%.
Mr Cowling added: 'This de-risking is coming at a significant cost, as evidenced by the fact that pension deficit funding is significantly up from the last quarter. Exposure to equities will continue to fall in favour of fixed income as schemes seek to de-risk. This move is important because of a significant minority of FTSE 250 schemes could be viewed as considerably jeopardised by the extent of their liabilities.'