Two more big companies moved yesterday to contain the costs of their final salary pensions as actuaries warned billions of pounds had been added to the deficits of most such schemes by developments in the past few days.
Scottish & Newcastle said members of its final salary pension would have to contribute money to the scheme for the first time, while the John Lewis group and Wait-rose supermarket was reported to be considering raising its retirement age.
Actuaries at Aon Consulting estimated that British pension schemes had seen their deficits rise by some £28 billion this week due to a sharp fall in yields from Government bonds.
British Airways said its deficit was £2 billion under the new IFRS 17 accounting rules, though the actuarial shortfall would be less.
Scottish & Newcastle announced that from April 6 the 3,200 members of its final salary pension will have to pay in six per cent of their salaries to the scheme.
S&N staff who do not want to contribute will be given the option of joining a career average salary scheme, where contribution levels range from zero to six per cent.
The final salary scheme was closed to new members in April, 2003 when the career average scheme was set up.
S&N said that when its final salary scheme was last valued in 2003 it had a £400 million deficit under FRS17. Since then the company has paid in £200 million.
John Lewis did not comment directly on a report that it was looking at increasing the age at which staff can collect a full pension, from 60 to 65 for ordinary workers, and to 62 for department managers.
It has set up an internal committee to carry out a cost-cutting review to save £10 million a year.
The committee is considering raising the retirement age only for members of the non-contributory final salary scheme, who are at present below the age of 50.
In Birmingham, Andrew Mewis of Deloitte, suggested the deficit faced by companies in the 100-share Footsie index has risen by £35 billion since the end of 2005 to £110 billion. He urged companies to look at new ways to manage away the volatility of pensions deficits.
"Although the value of the assets held by pension schemes will have increased in line with the recent rise in markets, this has been outweighed by falling real interest rates which increase the value of pension liabilities," he said.
The present crisis came to a head on Tuesday when heavy buying of inflation-matching indexed Government stock (known as gilts) fell to 0.7 per cent from 0.81 per cent in a single trading session, one of the biggest one-day movements ever. That yield - the return over and above inflation - has fallen from 1.05 per cent on Christmas Eve.
Donald Duval, chief actuary at Aon Consulting, blamed the Government. "The problem arises because there are so many pension funds trying to buy index-linked stock and there isn't enough stock available," he said.
"This problem has been created by the Government, who compelled all company pension funds to guarantee all pensions against inflation, but then failed to issue enough index-linked gilts to enable pension funds to invest to match the liabilities which the Government imposed on them.
"This imbalance has been made worse by the actions of the pensions regulator."
