Firms facing a '£800bn final salary pension pot gap'
British companies are facing an £800bn funding gap for their final salary pension pots after seeing the deficit nearly double over the past decade, according to research.
The gaping hole in defined benefit pension schemes has widened from £425bn to £800bn since 2006 amid lower expectations on future investment returns and people living longer, a report said.
The study, conducted by JLT Employee Benefits, found the pensions deficit had ballooned despite employers pumping in contributions worth £160bn. It also discovered that each final salary policy could see a gap of as much as £73,000.
The study predicted that the total actual cashflow schemes will have to pay out could reach £3.6trillion.
And if interest rates stay low, firms will have to stump up £220bn in contributions over the next decade to reach the deficit levels of 2006, the report said.
The warning comes amid volatility for financial markets thanks to falling commodity prices, low interest rates and slowing economic growth in China.