Funding of company pension funds is better in the US than the UK, according to data collected by Aon on the basis of company annual reports.
The Daily Telegraph says the figures suggest just 5% of UK company pension schemes are fully funded, against 20% in the US. This comes despite a doubling of contributions in the UK in the past few years, Aon’s report states.
Falling bond yields, greater lifespans, and declining equity returns have contributed to offset these additional contributions.
The average pension fund deficit of a US company is about two months of pre-tax profits, compared with about seven months for the average UK company deficit, Aon adds. The consultant estimates that about a quarter of UK companies have pension deficits greater than two years of pre-tax profits.
UK INTEREST RATES may remain unchanged for a while following yesterday’s surprisingly robust official inflation figures, says the FT
Fewer retail bargains and a surge in energy prices helped push the consumer price index to 2.3% in July, well above the Bank of England’s long-term target rate of 2% - which was the rate recorded for June.
Economists are divided as to whether the latest inflation figures suggest a tougher monetary line will be required: some point to the fact this is only the first time since 1999 that UK inflation has been higher than in the eurozone, while others also point to a slowing UK economy as a more serious threat than higher prices at the petrol pumps.
ASSET MANAGERS AROUND the world stand accused of double standards today, reports The Times because of calls for listed companies to invest more in capital expenditure.
The call comes despite fund managers themselves continuing to exert pressure on these same listed firms to boost shareholder returns, either through special dividends or share buybacks.
A Merrill Lynch poll of 288 fund managers overseeing $933bn in funds has found half believe companies are underinvesting. Both the Institute of Directors and trade union Amicus have reacted negatively to the findings, both pointing out that these are the same people who have stifled expenditure in areas such as R&D in order to squeeze more cash out of businesses.
Doug Godden, chief economist of the CBI says he is surprised by the survey’s findings: given the current state of the economy facing higher oil prices, large pension deficits and growing tax bills it does not seem the most obvious time to increase capital expenditure.
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