The 100 largest U.K. corporations contributed a record £17.5 billion ($27.9 billion) to their defined benefit pension funds in 2009, up 49.6% from the £11.7 billion contributed the previous year, according to a new report by investment consultant and actuary Lane Clark & Peacock.
Lloyds Banking Group PLC, Royal Bank of Scotland PLC and Unilever PLC each contributed more than £1 billion to their U.K. pension funds. Royal Dutch Shell PLC topped them all with a £3.3 billion cash injection, up £2.5 billion from the previous year’s contribution, according to LCP’s 17th annual “Accounting for Pensions” report.
In 2009, £10.9 billion — or 62% — of employer contributions to DB plans were made to close deficits, while the remaining £6.6 billion were regular pension contributions. In the five previous years, the ratio hovered between 34% and 39%.
However, it’s unclear whether the large contributions will continue. Aggregate FTSE 100 company pension contributions will be £4.8 billion lower in 2010 than in 2009, according to LCP’s analysis, which was based on 2009 company reports.
On the other hand, companies that are updating actuarial valuations of their pension funds this year might have to follow the lead of companies like Shell and Unilever in upping contributions.
“Indeed, we have seen evidence of this in some 2010 accounts that have already been published,” according to the report. Following valuations in the first quarter of 2009, three U.K. companies paid an aggregate £276 million to their DB pension funds in 2010, up from £182 million in 2009. That’s a 51.6% increase.