Top firms' £4bn pension black hole

BRITAIN'S leading firms have reported a £ 4bn pension funds cash shortfall. Experts say the real figure could be as high as £10bn. An analysis by consultants Watson Wyatt shows the huge scale of the pension crisis afflicting millions of workers.

A quarter of FTSE 100 companies have declared 'holes' in their pension funds that by the end of last year amounted to £4bn. The shortfall could soar above £10bn once all the top companies have disclosed the state of their funds.

The total have been exposed by a little known accounting standard, FRS17, which requires firms to report yearly on the value of their pension funds. As a result of the measure, which makes clearer any deficits, it is believed that many more companies will declare large holes in their funds.

The problem afflicts firms running schemes based on final salaries - typically offering a pension of two-thirds of an employee's final wage. In the past, companies were able to mask pension fund shortfalls by smoothing out variations over many years.