More than one in ten of the UKs leading 100 companies have total disclosed pension liabilities greater than their equity market value, according to research published by JLT Pension Capital Strategies yesterday.
The consultancy's analysis of the FTSE 100 found that 11 of the firms listed on the index currently face this challenge, with one - International Airlines Group - recording total disclosed more than give times its stock market value in its most recent annual report and accounts. BAE Systems, BT and the Royal Bank of Scotland also have disclosed liabilities more than double their market value.
According to JLT's analysis, only 16 firms disclosed a pension surplus in their latest accounts, while 69 reported a deficit. The firm estimated that only 12 companies would have reported a surplus if they had reported their accounts at the end of June.
Overall, the total deficit of the FTSE 100's defined benefit pension schemes as of the end of June was £55bn - compared to £77bn a year earlier - despite deficit contributions over the 12 month period totalling £12.5bn, compared to £1.4bn over the previous year.
Charles Cowling, managing director of JLT Pension Capital Strategies, said: 'We have reached a stage where scheme deficits are widening substantially on an annual basis. Whilst large companies are making the effort to plug the gaps, rather like quantitative easing there will be a law of diminishing returns and one day the music will stop.
'Many companies are still running mismatched investment strategies and pension liabilities continue to grow. Eurozone worries show few signs of abating and increasing life expectancy continues to pile pressure on schemes and their sponsoring companies.'
The largest deficit contribution came from BT, which paid £1.9bn - on top of regular contributions - to try to close its deficit. Another 61 FTSE 100 firms also reported 'significant' deficit contributions.
JLT found a continued trend towards increased investment in bonds by the FTSE 100, with the average scheme now allocated 56% of its assets to bonds, up from 50% a year earlier and 33% six years ago.
A total of eight of the firms listed on the index has changed their bond allocations by more than 10%, and Cowling said the flow into bond investment was likely to continue.
'As well as continued flows into bond allocation, this year we expect to see a trend towards companies looking at alternative sources to fund their pension schemes. We have already seen companies make use of property partnership deals to help tackle their pension deficits.'