It is likely these additional contributions will be invested in bonds as U.K. pension plans try to match liabilities and reduce their overall equity exposure, said Raj Mody, principal consultant at Hewitt Bacon & Woodrow, London.
GlaxoSmithKline PLC, Brentford, made a total pension contribution of £598 million, which was three times the firm's service cost. During 2003, the group had a £1.8 billion deficit across its pension plans worldwide, according to the company's annual report.
The bulk of the cash contribution went to the group's £3.6 billion U.K. pension plan and was given to the plan's incumbent bond managers — Schroders PLC, Morley Fund Management Ltd. and Legal & General Investment Management, all of London, said Martin Mannion, the pension fund's finance manager.
Plan trustees intend to increase the allocation to bonds, which was 15.5% as of Dec. 31, but Mr. Mannion would not say by how much. Watson Wyatt Worldwide, Reigate, England, is advising.
Trustees of the £3.6 billion Marks & Spencer PLC Pension Scheme, London, have parked in short-term bonds the £400 million contribution made to the plan, said Lynn Collins, head of corporate pensions. The contribution represented 431% of the group's service cost.
The cash will be invested in longer-term investments once trustees complete an asset-liability study; she would give no further details. Watson Wyatt is advising.
BP PLC, London, contributed £1.5 billion ($2.5 billion) — more than four times its service cost — to its worldwide pension plans with assets totaling $27.8 billion. Steven Lockhart, financial controller at BP Investment Management Ltd., said the bulk of the assets were invested in the group's U.S. pension plan. According to the group's 2003 annual report, the $6.8 billion U.S. plan had a deficit of $852 million.