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PaulS's picture

Collapse of pension funds?

Pension fund liabilities now dwarf the capitalisation of many of the biggest companies in the UK. This threatens not just the continued acceptance of new employees into these pension schemes, but the viability of the pension schemes themselves.

It used to be the case that once you start drawing your pension, you are save. Nothing can stop your pension being paid out. That assumption is no longer so clear. The pension liabilities are now in many cases so much larger than the companies that established them, that even if markets start recovering (not likely, see blogs)the it is no longer save to assume that. More likely, pension funds may need to start reducing monthly pension payouts at some point in the future.

Much better to transfer your pension into SiPP and administer it yourself.

The news comes as the National Association of Pension Funds warns that more companies are planning to abandon generous pension schemes as they claim these growing liabilities are becoming a heavier burden on their recession-strapped businesses.
In total there are 14 companies in the FTSE 100 whose market value is lower than the size of their pension funds - measured by their obligations.

Leading the pack is Royal Bank of Scotland whose pensions obligations stand at about £27bn. Following RBS's 96% slump in the past year, it is valued at only £4.3bn.

BT is also worth a fraction of the size of its pension fund, with a market value of £8.5bn and pension fund obligations of £34.5bn.

Company / Market Cap / Pension scheme liabilities

Aviva £6.7bn £8.23bn
BAE Systems £13.9bn £17.2bn
Balfour Beatty £1.63bn £2.42bn
Barclays £4.36bn £17.6bn
British Airways £1.7bn £8.56bn
BT Group £8.5bn £34.5bn
First Group £1.42bn £2.79bn
Invensys £1.15bn £4.9bn
Lloyds Banking £7.6bn £24.4bn
Marks & Spencer £3.45bn £4.56bn
National Grid £15.25bn £18.2bn
Rolls-Royce £5.7bn £6.9bn
RBS £4.3bn £27.3bn
RSA £4.35bn £5.08bn

The full article is at