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FTSE companies saddled with massive pension deficits

While the underlying underfunding position of final salary pension schemes operated by FTSE 100 companies is around £73 billion there after 10 companies with alleged pension fund deficits which are in fact greater than their market capitalisation. This perfectly reflects the massive turnaround in pension fund deficits which around a decade ago were actually in credit. The days of companies taking "pension fund contribution holidays" have long gone with companies such as British Airways and British Telecom struggling with enormous pension fund deficits.

Due to the makeup of final salary pension schemes they are not directly linked to investment returns as they're based upon the number of years service by the individual as well as their final salary. Despite the fact that the overall situation has improved to the tune of £17 billion over the last 12 months a combined deficit of £73 billion is still an enormous burden to carry forward.

There will come a time when final salary pension schemes in the private sector are non-existent because effectively they are not affordable. Despite many companies battling to save their final salary pension schemes the vast majority will soon be forced to give up the fight and convert them into defined-benefit arrangements.

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