02 Aug 2017

Report: Accounting for Pensions

LCP's latest report found that over the past 10 years FTSE 100 companies have paid around £150 billion into their defined benefit pension schemes. However, despite this high level of funding, the continued rise in liability values has seen the net accounting position worsen.

Key findings:

The accounting deficit in respect of UK pension liabilities improved from 2016 due to strong returns on assets, and a record level of contributions.
FTSE 100 companies paid four times as much in dividends in 2016 as they did in contributions.
Pension liabilities could reduce by £30 billion if those using RPI were able to switch to CPI.
Liabilities may be being overstated. Improving methods of setting accounting assumptions could reduce the combined accounting liability for FTSE 100 pensions by £25 billion.
Pension schemes continue to pose a very significant potential risk for certain companies.