New rules reveal pensions crisis

TOUGH new accounting rules have caused two thirds of companies to reveal pension fund deficits. More than a third of these schemes have reached critical funding levels with deficits in excess of 10%, putting pensions at risk.

Mercer Human Resource Consulting has examined more than 59 sets of top company accounts published under the FRS 17 accounting standard. The results show a significant move away from investments in shares, with one in five schemes now holding less than 60% in equities, compared with 75% a few years ago.

Mercer said employers want to reduce the impact of FRS 17 by investing in areas such as bonds. But the impact of poor equity returns that has caused funding levels to drop has also accelerated the switch.

European partner Tim Keogh said: 'The danger is that, if a big scheme dips into deficit, a company may not be able to support the pension fund. A deficit could represent several years' profits, so it is important the risks are managed accordingly.'

More than a third of firms have pension assets that exceed 50% of the company's net assets.