Pension shortfalls: BT and Vodafone named

Seventeen of the nation's largest companies don't have enough money to pay the pensions they've promised their workers.

According to a report from actuaries Bacon and Woodrow, the figure is up from last year, when just 10 companies in the FTSE 100 had under-funded pension schemes.

One unnamed company in the list has a £170m shortfall. BT and Vodafone were both listed among the companies with pension shortfalls.

A BT spokesman said: "It's an actuarial problem, to do with predictions of how long people live."

Until 1 April, BT ran a "defined benefits" scheme, which promises a given annual sum every year on retirement.

To do this BT has to buy an annuity - pay a lump sum to a pension company - in return for guaranteeing an income to the pension holder for the rest of his or her life.

Annuities are becoming more expensive as people live longer, so to guarantee an employee a given retirement income, the pension fund has to spend more money - hence the shortfall.

The BT spokesman added: "We are fully committed to topping the pension fund up. For tax reasons, it's much easier to top up [a pension fund] than to take money out, so like many companies we try to run it as close to the limit as possible."

In April 2001 BT announced that the "defined benefit" scheme, which guarantees an employee a certain income, would be scrapped in favour of a "defined contribution" scheme, with no guarantee of a pension income in proportion to an employee's final salary.

Vodafone is also on the list, but a spokesman said: "This is the situation you would expect at a young company. We are fully funded for current liability."

He was not able to comment in detail on an article in the that the company had recognised an £11m shortfall in the fund in 1998, and instituted a five-year programme to remedy the situation by paying extra cash into the fund.

Brian Wilson, head of benefits research at Bacon and Woodrow, said: "The situation is not serious, but it is a warning. There are more companies under-funded than last year, and it would be my expectation that the figure next year will be higher rather than lower."

Several high-tech FTSE 100 companies, including ARM Holdings, Logica, Marconi, Misys and the Sage Group failed to disclose pension data.