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A third of FTSE firms cannot plug pension deficits

Pension scheme deficits up £55bn since 2008 and £11bn of payments by firms last year has done little

A third of FTSE 100 firms cannot meet their pension fund shortfalls from current discretionary cash flow, despite spending over £11bn last year to plug the deficit, says a study by accountancy firm KPMG.

The figure is the highest since the survey began five years ago, and has gone up from 2009 when about 22 per cent of blue chip companies could not pay pension shortfall in any realistic timeframe.

KPMG's latest pensions repayment monitor revealed that the UK's biggest companies were confronted with a growing pensions deficit and that business growth could be hit by pension costs.

It showed that aggregate FTSE 100 deficits increased to £50billion in 2009, up £10bn from 2008. This had further expanded to £65bn by the end of June 2010.

According to the report, about 46 per cent of FTSE 100 firms would be able to meet their pension shortfall from discretionary cash flow within a year and 63 per cent within three years.

KPMG pensions partner, Mike Smedley, said that these figures look alarming but they reflect the consequences of the economic downturn on profits and cash flow.