Deficits on the pension schemes of the UKs largest companies rose by £1bn last year despite good investment returns.
That finding has came from actuarial and financial consultancy LCP's annual Accounting for pensions report, published today, which said pension schemes of FTSE 100 companies had a combined deficit of £43bn at June 30, up from £42bn a year earlier. Their liabilities totalled £0.5 trillion.
The deficit 'remains stubbornly high in spite of £21.9bn in company contributions', LCP noted.
Only 61 of the FTSE 100 companies continue to provide defined benefit pensions to some of their employees and most are expected to close their schemes to future accrual.
Today's report was LCP's twentieth and when the series began all but two of the FTSE 100 offered employees defined benefit schemes.
Now just 39 do so, a level LCP said was 'expected to fall further as companies review their options when contracting-out ceases in 2016'.
The overall level of cover this year sits at 91%, against 20 years ago when the average FTSE 100 pension scheme's assets were sufficient to cover 120% of liabilities and companies enjoyed pension contribution 'holidays'.
As equity values rose over the year and gilt yields looked increasingly unattractive, asset holdings in equities grew to 36.4% compared with 34.8% last year, still a long way from the 70% level seen in 2001.
Companies increasingly looked to alternatives to cash funding including investments in everything from cheese (Dairy Crest) and whisky (Diageo) to aircraft (International Airlines Group).
LCP partner and report author Bob Scott said: 'Pension planning continues to be blighted by seemingly constant regulatory and legislative change.
'In the past 12 months alone we have seen the re-introduction of auto-enrolment; the announcement of a flat-rate state pension and the end of contracting-out; and further changes to the IAS19 accounting standard.
'Is it any wonder that the past 20 years have seen traditional final salary pension schemes phased out to be replaced largely by lower-quality defined contribution schemes?'
Scott said changes to IAS19 meant that, from 2013, companies have to disclose their full pension deficits on the balance sheet; and, in many cases, show a lower figure for 'interest' on their pension scheme assets. These measures are expected to increase balance sheet liabilities by £20bn and reduce pre-tax profits of FTSE 100 companies by more than £2bn.
'Compared to 20 years ago, the typical FTSE 100 company now makes a considerably more detailed and informative pensions disclosure in its annual accounts,' Scott said.
'With pension liabilities approaching £0.5trn - and with constant legislative changes - many companies will be hoping that, in 20 years' time, they have managed to completely remove any pensions risk from their balance sheets.
'This may be good news for their shareholders but is unlikely to improve the lot of those employees who are relying on good workplace pensions for their retirement.'
