Stock market gains fail to plug pension gaps

09 February 2004
A new study by Mercer Human Resource Consulting has warned that equity market gains have failed to plug the deficit in company final-salary pension schemes.

According to Reuters, the report explained that occupational schemes face a £330 billion divide between asset values and expected liabilities.

Paul Greenwood, a partner at Mercer, suggested that unless company pension schemes cut benefits to future retirees gains in the stock market are unlikely to close the funding gap.

"The current levels of pension benefits can only be guaranteed at great economic cost. The sooner the government recognises there is a problem and adopts coherent policies to deal with it, the better," he stated.

Mr Greenwood urged the government to implement a number of reforms such as scrapping the rule requiring pension benefits to be increased in line with inflation and raising the age of retirement.

A separate study by Lane Clark & Peacock, which measured the pension deficits of schemes run by FTSE 100 companies, estimated the shortfall to be around £55 billion.