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UK public companies boosted by potential pension funding change

Shares in BT, British Airways and ITV were fairly buoyant towards the end of last week amid news that the Pensions Regulator may be taking a softer stance on pension deficits. The three companies mentioned above have particularly large pension fund deficits, due in the main to a fall in the value of property and the UK stock market, which had led to fears of financial problems in the short to medium term.

There were significant concerns that companies currently experiencing significant pension deficits would be either forced to redirect profits to their pension funds or take on further debt to cover ever increasing liabilities for the future. However, the Pensions Regulator has suggested that funding issues are open to negotiation amid the ongoing downturn in the UK. This will see a number of finance directors across the UK breathing easier this weekend although as ever we await the fine details of the proposed changes.

This is the first time the Pensions Regulator has actually come down on the side of corporate entities as opposed to protecting the pension fund arrangements of employees. However, in many ways the regulator had very little choice because by pushing companies too hard to cover their deficits too quickly this could put many companies at risk and worsen a pension problem which is already critical in many cases.

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