Now US fund crisis hits pensions

HUNDREDS of thousands of British workers who hoped to escape the UK pensions crisis because they work for foreign-owned companies are to be told that they too could face poverty in their old age.

Financial Mail has established that giant American companies, many with major UK operations, are running massively underfunded pension schemes. The shortfalls involved are so huge - hundreds of billions of dollars spread over the 6,000 biggest companies - that experts fear the global financial system could be undermined.

Car giants Ford and General Motors, owner of Vauxhall, are among the most vulnerable in the current stock market slump.

The revelation comes as BT faces the prospect of hostile questioning at its annual meeting this week over a pension deficit that has ballooned from £1.8bn in March to an estimated £5.7bn - the largest of any UK company.

More than 7,200 American companies have subsidiaries operating in Britain employing thousands of workers.

With share prices falling again on Friday - the FTSE 100 closed at a five-year low of 4,224, while the Dow Jones closed at 8,684.6, down 695 on the week - the misery for workers in big company pension schemes is worsening by the day.

As the Pickering and Sandler reports into the growing pension and savings crises were published last week in Britain, one study in America revealed that the deficit in pension and healthcare obligations will hit at least $40bn (£26bn) by the end of the year for the 20 US companies with the biggest shortfalls. This could easily double unless stock markets stage an immediate and sustained rally.

Hundreds of other companies are struggling with fund deficits at a time when they can illafford to divert cash from core operations and face difficulty raising money either by selling more shares or borrowing.

Even big European groups have been hit by the market plunge.

Dutch bank ABN Amro, a major player in the City, was forced last week to admit to an £850m shortfall in its pension scheme in Britain. A massive drop in global stock market values - $2,400bn (£1,550bn) in the US alone since the start of the year - has undermined the value of pension fund assets so severely that some companies could face bankruptcy if they are forced to make up the shortfall.

The average US company had expected their pension fund assets to appreciate by nine% this year. But companies, including IBM and General Electric, which had routinely booked big surpluses in their pension funds will be now be forced to recognise substantial losses. Not only could that leave their employees much worse off on retirement, it could also worsen Wall Street's current panic.

Analysts at Prudential Securities rate the pension issue especially dangerous for Ford, which is burdened with $165bn of debt and is struggling to regain ground after a disastrous couple of years.