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Company pension gap is closing fast

The pension crisis is easing with a massive £60bn wiped off UK companies&#39 pension deficits through improved equity values and increased contributions, says the CBI.

It says the pension deficit of UK companies fell by 37 per cent to £100bn at the end of 2003 from an estimate of £160m last June.

The CBI described the findings, which are based on FRS17 valuations, as encouraging but stressed the overall deficit remains enormous and is a major business concern.

It estimates that firms will have to make additional contributions averaging £6bn a year over the next three years, although this is half the £12bn estimate that seemed likely at the height of the pension crisis in the spring of 2003.

The CBI survey shows the crisis has triggered a significant shift in the type of pension on offer as firms moved to reduce liabilities.

Two-thirds of firms have kept defined-benefit schemes for existing employees but only 24 per cent for new staff. Forty-one per cent of firms have switched from DB to defined-contribution pension schemes over the last two years.

CBI chief economic adviser Ian McCafferty says: “Amid all the bad news about pensions, these findings give reason for a little cautious optimism. Firms are still having to make sizeable financial provisions to make up the shortfalls in pension schemes but the problem is more under control.

“Employers remain committed to pensions despite the difficult circumstances but we have got to encourage them to stay in the game. There are still enormous liabilities and the shift away from final-salary schemes is likely to continue.”

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