Top firms face £55bn pensions black hole

Britain's 100 biggest companies saw their pensions black hole more than double from £25 billion to £55 billion in the last year, according to research published today.

The crisis means the FTSE 100 index of leading shares would have to rise from 4121 today to at least 6000 - a rise of 50 per cent - to wipe out the deficit.

Actuarial consultants Lane, Clark & Peacock said the share market would have to stage an almost unprecedented rally - the average forecast for the FTSE 100 in August 2004 is 4,520, up less than 10 per cent. It is more than two years since the market began its retreat from the 6000 mark.

Otherwise, firms will have to raise the amount they contribute to pensions.

While the companies contributed £3.6 billion into pension funds over the last year, the amount workers and former workers had accrued, or are owed by pension funds, had risen by £4.2 billion - a shortfall of £600 million.

Worst hit was British Petroleum, which saw a pension surplus of £1.5 billion become a shortfall of £3.4 billion at the end of last year. The firm recently announced plans to up its pension fund payments.

Only former building society Northern Rock had a slightly lower deficit at the end of 2002 compared with 2001 after it increased its employer contributions.

Chris Tavener, a partner at Lane, Clark & Peacock, said firms had been hit by a double whammy of the stock market collapse and higher liabilities under the new accounting rules. For every £80 of pension assets, in the shape of shares and investments, the firms had pensions liabilities amounting to £100, under the controversial new accounting standard FRS17.

Last month the CBI said private companies not listed on the stock market would have to raise their contributions to their pension funds by £36 billion over the next three years to wipe out their deficits.