UK pension gap 'worse than US'

17-08-2005

UK company pension schemes are four times more likely to be in deficit than US schemes, research has suggested. Just 5% of UK pension schemes are fully funded, which means that they have enough assets to meet their future obligations to members.

In the US, one in five pension schemes are fully funded, the research from AON Consulting found.

UK pension schemes are worse off than US schemes because employers' contribution rates are lower, AON said.

Left behind

Overall, the average pension deficit of a UK firm equated to seven months of pre-tax profits, whereas in the US the figure is two months.

Both US and UK pension schemes are finding it difficult to cope with the costs of members living longer, AON said.

However, US employers seem to be moving more swiftly to pay money into their workers' pension schemes.

"UK companies have not increased their level of cash contributions to the same extent as their counterparts in the US," Andrew Claringbold, spokesman for AON Consulting said.

Gap narrows

Recently, the outlook for UK pension schemes has shown modest signs of improvement.

Last week, actuary firm Lane, Clark and Peacock calculated that the combined pension deficit of the UK's top 100 companies had narrowed in the past year.

The combined pension fund deficit of the FTSE 100 companies fell from �42bn to �37bn in the year to July, the firm said.

Increased contributions from employers and improved stock market performance were the key reasons for the reduction.

But, if current trends continue, the black hole will not be closed until 2013, the group warned.

BBC News

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