£463m pension hole at AstraZeneca

A HUGE black hole has opened up in the pension fund of Anglo-Swedish drugs giant AstraZeneca. The £463m shortfall is believed to be the largest deficit revealed so far under controversial new accounting standards that force firms to disclose more details about the fluctuating value of their pension schemes.

The news comes as AstraZeneca decides whether to take legal action against Merrill Lynch Investment Managers. Until last year, it managed part of AstraZeneca's £2.1bn pension fund, which covers 20,000 existing and former staff.

Trustees have been considering their options since an out-of-court settlement between the US-owned fund manager and consumer goods group Unilever. A decision on whether to pursue the case is expected in the next few months.

Unilever sued Merrill after a £1bn pension fund it ran underperformed an agreed benchmark index. After a two-year battle and a highprofile court case featuring Merrill's joint managing director Carol Galley, Merrill humiliatingly agreed to pay an estimated £70m to Unilever without admitting liability.

Details of the pension fund shortfall are shown in AstraZeneca's latest annual report. It provides no clue about the future of embattled chairman Percy Barnevik, whose own pension arrangements have caused outrage. The highly-respected Barnevik, frequently voted Europe's most admired manager, shocked investors last month when it was revealed he had received an unauthorised £61m retirement payout from ABB, the Swiss-Swedish engineer that he used to head.

As the furore mounted, Barnevik was forced to resign as chairman of Investor, the Swedish investment company that has five% stakes in both ABB and AstraZeneca, where it is the second-biggest shareholder.

Analysts say Barnevik's position at AstraZeneca looks increasingly shaky following the clear withdrawal of support by Investor over his behaviour at ABB.

Barnevik is due to stand for reelection as AstraZeneca chairman at next month's annual meeting, but no decision has been taken on whether he will seek reappointment. Nominations are expected to be sent to shareholders in the next few weeks.