One in Five FTSE 100 ension funds are at Risk of Failure in a Recession


Research reveals that if Britain entered ­another economic downturn, one in five FTSE 100 ­defined benefit pension schemes would be at risk of experiencing failure.

According to a study by consultants Cardano and Lincoln Pensions, the combined pension deficits of the blue-chip index would rise by £100bn in a “stressed” scenario such as a recession. This is equivalent to four years of pre-tax profits.

In such scenario, a fifth of the FTSE 100 firms would experience pension risks that are worth 30pc or more of their firms’ market value, making a widespread scheme failure more possible.

The report discovered that some sectors were struggling more than others, with consumer goods and services businesses posing the biggest concern, while gas and oil firms were found to be more on top of their pension commitments.

The level of risk that is faced by FTSE 100 ­defined benefit schemes has risen by 20pc over the past three years. The defined benefit pensions schemes’ vulnerability has come into sharp focus in recent years.

Researchers of Cardano and Lincoln Pensions utilised the state-sponsored Pension Protection Fund’s stress test criteria to help arrive at its conclusions.