The largest companies in the U.K. injected significantly lower levels of cash into their defined benefit funds in 2015 compared with immediately after the financial crisis, said consultant Barnett Waddingham.
Over the past three years, contributions by FTSE 350 sponsoring employers have remained stable around £8 billion ($10.4 billion) per year. However, this is a significant drop compared to the total £12 billion per year contributed in each of 2009, 2010 and 2011.
Uncertainty following the U.K.'s June 23 vote to leave the European Union is expected to force companies to increase contributions in order to help stabilize the ballooning deficit, said the consultant.
“Given the movements in financial markets over the last six months, and the implications of Brexit, it seems likely we will see a move back to the contribution levels required post-financial crisis,” said Nick Griggs, head of corporate consulting, in a news release.
Projected payments from DB obligations have remained stable, with more than £1.4 trillion expected to be paid by sponsoring employers over the next at least 60 years. Barnett Waddingham also noted the £630 billion of assets that are expected to fund these obligations have performed well, both in absolute and real terms, over recent years. However, because of falling gilt yields, future investment returns on these assets could be significantly lower, the consultant warned, leaving companies set to plug the gap.
Separately, analysis by JLT Employee Benefits showed the deficits of FTSE 350 company pension funds increased 17.5% last month, and jumped 55.8% in the year ended June 30, to a total £134 billion. Funded levels dropped to 83% at June 30, from 85% at May 31, and 88% at June 30, 2015.
Freya Hutchings contributed to this story
