BRITAIN'S blue-chip companies are putting at risk up to £80bn in final-salary pension schemes over the next 12 months as they place heavy bets on investments mainly in equities and property, consulting firm Deloitte said today.
The figure is an estimate of the maximum loss which pension funds at firms listed on London's FTSE 100 index could face in the event of adverse market movements.
Many pension schemes are heavily invested in risky asset classes, such as equities an
d property, which can yield higher returns over the long term but are volatile and could force firms to pump in cash to plug gaps if their values slump, Deloitte said.
Between June 2007 and June 2008 UK commercial property values fell by nearly 20 per cent, while the FTSE All Share index fell by more than 11 per cent.
The aggregate funding of UK firms' pension schemes from a surplus of £15bn at the start of the year to a deficit of £23bn now, partly because of sliding equity markets, Deloitte said.
FTSE 100 firms on average are risking about 8 per cent of their market value through their pension schemes, Deloitte said. The picture varies widely from company to company, it said, with some having more than 100 per cent of their market value at risk.
Industrial firms are at the highest risk of a plunge in their pension schemes' funding, with around 16 per cent of their market value in jeopardy, Deloitte said.
Oil and gas companies have a total of £16bn at risk but their strong market value means that translates only into 6 per cent of their value.
Firms and pension trustees should cut the risk in their scheme, through methods such as using bonds or derivatives to match their expected benefit payments or by offloading all or some of their liabilities to a specialist buyout insurer, Deloitte said.
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