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FTSE 100 companies request change in pension regulations

Tesco has come forward to ask the UK government to change the laws on pension payments and allow companies to reduce payouts where applicable. The ongoing demise of the UK economy and the UK stock market has placed significant pressure on the UK pension industry and many major companies are suffering. To give you an example of the current situation, Royal Bank of Scotland is currently valued at just over £4 billion but it has a pension fund with liabilities of £27 billion, BT is worth around £8.5 billion with pension fund obligations of over £34 billion.

While we have seen a substantial fall in the value of some companies compared to their pension schemes, in theory this should have no impact on the scheme's ability to fund payments in the future. However, there are serious concerns that as companies shrink during the ongoing recession their ability to keep up with pension fund contributions will be tested to the maximum. The days of "pension holidays" have long gone and literally hundreds of billions of pounds are required to plug an ever-growing pension funding gap.

It will be interesting to see how the government react to this call from Tesco as there is a need to balance the impact to companies as well as to pensioners.

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