Pension deficits in the UK’s largest companies have hit £62 billion, the highest level since the financial crisis.
According to new figures from consultancy firm Barnett Waddington, the combined pensions deficit of the FTSE 350 now accounts for 70 per cent of their profits, and the total figures has risen £12 billion since 2015 as profits remain low for the UK’s publicly-listed companies.
The recent surge in deficits is reportedly down to higher life expectancy and lower expectations for returns on investment.
Statisticians have warned that even a marginal drop in the value of bond yields could see deficits outstrip profits by 2019.
The news comes as former BHS owner Dominic Chappell is being taken to court by the Pensions Regulator for failing to provide information on the collapse of the retailer, which saw 22,000 pensions affected.
The BHS scandal also laid bare the struggle retailers are facing to plug pensions deficits.
In June the Pensions Regulator released its report on BHS’s demise, concluding that Sir Philip Green had sold it to “avoid liability” of the growing deficit.
Last year it was revealed that Tesco had a pensions deficit of £5 billion while both Sainsbury’s and Arcadia Group are thought have a deficit close to £1 billion.
Since the collapse of BHS the Pensions Regulator has been granted sweeping new powers to prevent another catastrophic collapse placing hundreds of thousands of employees pensions in jeopardy.
“Comparing the pension deficit to profits is a simplification, but it helps to put the scale of the challenge into context. Unless companies are profitable over the long term, they can’t generate enough cash to meet their liabilities, including the pension deficit,” Barnett Waddington’s Nick Griggs said.
“The deficit is essentially the difference between two much bigger numbers, and a few gentle economic triggers could completely change the picture.
“This is why many companies are not rushing to clear deficits quickly with additional cash contributions.”