07 June 2006
A quarter of FTSE 250 companies could pay off their UK pension
deficit within a year and just under half (49%) in three years from
purely discretionary cash flow according to a study by KPMG. The
study followed earlier research by KPMG on the ability of FTSE 100
companies to repay their pensions deficits from surplus cash flow
which revealed that around 70% of these companies could repay the
deficit within three years and around 50% within one year.
The study showed how sensitive companies' ability to pay off
deficits is to market movements. The main study was based on the
position at the end of December 2005. However, if recalculated
based on the market position at the end of April 2006, the
percentage of FTSE 250 companies able to pay off deficits within
one year rises to 37% and the percentage within three years
increases to 60%. The recent fall in the market has brought the
position back towards that of the year end. As of 30 May, 31% could
pay off deficits within one year and 56% within three years, again
illustrating the extreme volatility of companies' ability to pay
off pension deficits.
Companies in the consumer goods sector of the FTSE 250 emerged
best placed to clear their pension deficits from available cash
flow. The KPMG study showed over 90% could theoretically clear
their deficits in less than 10 years. Utility companies in the FTSE
250 were worst placed to clear the deficits with just 25% able to
do so in less than 10 years.
