It’s not necessary to have expert knowledge of complex subjects in order to play a valuable role for a client in writing about them. In this 2007 annual review of the Pensions Deficit Crisis for professional services provider KPMG, technical expertise was provided by the client in their own draft, with my job being to present this in an appropriate tone of voice capable of being understood by those less expert in the area. Advisory document for KPMG.

2007. Reappraising the Pensions Deficit Situation

In June 2006, KPMG carried out its first Pension Repayment Monitor.

Many companies, the Monitor found, would be able to repay their pension scheme deficits from discretionary cash flow* within 3 years if they chose to, with a significant number able to do so within a single year.

Now, in 2007, we’ve returned to reassess the situation, and four key findings emerge loud and clear.

• The ability of FTSE 100 companies to repay deficits out of discretionary cash flow improved in the 2006 financial year over FY 2005.
• For the 30% who will still require 3 years or more to repay, the position has got no better.
• Reductions in liability values for strong schemes mean that ‘trapped surpluses’ are now a real issue, particularly with the advent of Scheme Specific Funding.
• A full buyout of liabilities is now a viable option for companies with strong schemes, but one which few are yet taking.

A broader perspective from KPMG

The press has been enthusiastic in reporting the improved deficit position in the schemes of the FTSE 100 companies. Yet as the other key findings suggest, it would be misleading to view such an ‘aggregated’ interpretation as providing a complete picture.

In the following pages, you can read more about the Pensions Deficits situation as it looks now through the eyes of KPMG.


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