'Double-whammy' over pensions

THOUSANDS of employees are at risk of losing their retirement savings, as well as their job, if their firm goes bust, experts warn.

Britain's 40,000 final salary schemes, with 13m members, are normally considered ultra-safe. But Deutsche Asset Management predicts that more companies will go under with a pension deficit as falling stock markets have left a growing number of schemes under funded.

The 'double-whammy' has already hit several smaller companies, including glassware firm Ravenhead, which collapsed with a £5m pension shortfall. Experts say larger companies are now at risk, particularly those with poor trading, big debts and large pension funds.

DAM chief economist Steven Bell said: 'The risk of a major pensions accident is quite high. There should be a central fund, paid for by a levy on pension schemes, to bail out members as a last resort.'

Troubled telecoms equipment maker Marconi is reviewing its fund at the request of trustees. Several leading companies, including British Airways, Invensys, Pilkington and ICI, are likely to be hurt by new FRS 17 accounting rules forcing them to take the full cost of pensions into their accounts in one year rather than smoothing them over time.

'Millions of pounds of apparent pension surpluses have vanished in a puff of smoke. FRS 17 deficits are a pretty good indicator that members should be concerned,' said one senior industry figure.

Separately, Sir Howard Davies, chairman of the Financial Services Authority, accused Equitable Life of using reinsurance as window-dressing to 'impress or perhaps even bamboozle' regulators and warned other insurers against such practices. Davies, who said that policyholders have lost around £7.5bn in general insurance insolvencies in the 1990s, added that the industry needed to strengthen its capital base.