Since publishing its European Pensions Briefing report in September 2011, today's research reveals that the deficit has continued to grow due to falling bond yields and ongoing economic and financial challenges.
And whilst assets have grown by around 10% during the six-month period to the end of March 2012, falls in bond yields have caused liabilities to grow correspondingly.
Alex Waite, partner and head of LCP Corporate Consulting, said: "The volatile market conditions in the last 6 months have certainly taken a toll on the pensions deficits of the largest European companies. As well as hitting the €300 billion mark in March, the deficit figure is now double what it was in 2010 even though companies are making contributions in the region of €40 billion each year."
"Sound decision making by companies is more essential than ever to ensure that they are looking at the risks they are taking and actively managing those risks if they are not expecting them to be rewarded. Internationally, we are seeing that companies are increasingly adopting smarter investment strategies and looking at investment solutions involving transfers out to insurance companies, such as buy-outs and buy-ins."
LCP's analysis of the pension deficit figure also warns that the impact of legislative change - including the implementation of IAS19 and new EU disclosure and funding requirements - will be felt particularly acutely by corporate pension schemes sponsors, as governments continue to address national deficits by passing the burden to companies.
Alex Waite concluded: "The good news is that there are lessons we can learn from looking internationally, including the experiences of Japanese pensions in a low interest rate environment, and the move to Defined Contribution schemes in South Africa and the USA."
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