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FTSE 100 firms make record contributions to DB schemes

FTSE 100 companies boosted their annual spending on final salary pension schemes to £17.5bn last year, up from £11.7bn in 2008.

According to consulting actuaries LCP, the injection cut the cumulative FTSE 100 pension deficit by about a half to £51bn at the end of last month. It says increases in asset values following strong investment returns were another factor behind the lower deficit.

The biggest contributer was Royal Dutch Shell, which paid in a total of £3.3bn, up more than £2.5bn on contributions paid over the previous year.

Lloyds Banking Group, Royal Bank of Scotland and Unilever also paid more than £1bn into their defined benefit schemes while companies such as British Airways, Lloyds Banking Group and Wolseley paid more into pension schemes than they did to shareholders in dividends.

Partner Bob Scott says that while the record level of contributions is reassuring for scheme members such increases reduce the scope for firms to invest in their businesses.

He says: “We have already seen a number of companies modifying their schemes to reduce ongoing pension costs – in some cases closing their schemes altogether – and this trend may be accelerated from 2012 as it becomes compulsory for companies to enrol all employees in a pension scheme and to offer a minimum level of contribution or benefit accrual.”

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