Employer pension plans in the United States are four times more likely to be fully funded than occupational pension plans in the United Kingdom, according to a study by Aon Consulting of company annual reports.
Aon estimates that only 5 percent of U.K. pension plans are fully funded, compared to about 20 percent of U.S. pension plans, in comparing pension information for companies with total pension assets of around $800 billion. The research found that, on average, the pension plan deficit for a U.S. company represents around two months' worth of profits, compared to seven months of profits for the average U.K. company.
What the report said was more alarming, was that about a quarter of companies in the U.K. have pension plans with a deficit representing over two years of profits, putting a significant strain on profitability, whereas less than 5 percent of U.S. companies are in a similar position. The report said that one of the main reasons U.S. pension plans are better funded is because companies have put in cash contributions of over 10 percent of plan assets over the last two years, compared with only 7 percent for U.K. companies.
"Although U.S. plans are, on the whole, well funded, some plans have experienced real problems, including significant underfunding upon termination, that have affected the deficit at the Pension Benefit Guaranty Corporation," said Aon U.S. consultant Brad Klinck, in a statement. Klinck noted that discussions surrounding changes to both U.S. funding and accounting rules, and global accounting standards, are continuing.
