Pension shortfall fear for Marconi

FEARS are growing that the already delicate financial position of telecoms group Marconi could be seriously undermined by a fall in the value of its £2.7bn pension fund.

The company is one of five major corporations whose pension funds are said to be vulnerable to a slide in the value of shares.

Investment bank Merrill Lynch has listed British Airways, steel-maker Corus, engineering group Invensys and chemicals giant ICI as having pension funds worth more than the parent companies' stock market value.

Under new accounting rules, any decline in the value of pension funds must be shown on the balance sheet. In some cases, this could wipe out any reserves.

Concern over the volatility of shares prompted Boots to move its £2.3bn pension fund out of equities and into blue-chip bonds, as Financial Mail disclosed last month.

Marconi, which is barely operating at break-even and has debts of more than £4bn, is reviewing its pension fund following the sale of five telecom component factories earlier this year. As a result, about 2,900 employees will transfer out of the fund.

Marconi, whose pension contributions top £20m a year, has promised to provide pension trustees with a 'snapshot' of the fund's position early in the New Year.

A company spokeswoman admitted that 'like every other pension fund' Marconi was looking at its investments following the share price slump.

Marconi's pension fund has less than 60% of its money in the stock market. At its last official valuation in early 1999, the fund had more money than liabilities.

One fund trustee said he was confident that there was no cause for concern. He admitted, however, that former deputy chief executive John Mayo had started a review of the fund that could have replaced the generous final salary scheme with a cheaper defined contributions scheme.

Any shortfall in the Marconi pension fund could add to the company's crisis, as it would have to repair the damage.

Per Lindberg, analyst with investment bank Dresdner Kleinwort Wasserstein, said: 'Marconi's financial situation is all but disastrous. The company is really in the hands of its banks. Any additional liability for the pension fund will merely add to their woes.'