ICI discloses large rise in pension deficit

Global conglomerate ICI's UK pension fund deficit has risen to £470 million, up from £443 million reported at its last valuation in 2003. However, in a statement the company added that initial actuarial indications show that changes to mortality assumptions, to take account of increased longevity, could add a further £100-250 million to that deficit.

"Having reviewed the valuations to include changes in potential assumptions on longevity, it was concluded that there would probably be an increase in the deficit for funding purposes over and above that which would have been calculated purely based on the actual experience of the scheme," says John Dawson, ICI's vice-president of investor relations and communications. "This indicated that it was probably of an order of magnitude that the company should disclose it (the deficit) pretty much immediately to its investors."

Following ICI's 2003 valuation, the company agreed to make top-up contributions to its UK pensions fund of £62 million per annum for nine years from 2004, and to provide an asset-backed guarantee for £250 million in order to support its commitments to the fund. This followed an analysis in March 2000 when the company estimated its deficit at £148 million, at which point it agreed to introduce a schedule of six annual top-up payments of £30 million.

The current £62 million annual top-up payments are paid into a special-purpose vehicle designed to give pension trustees and pensioners added security in the event of the company being wound up, in which case they have first call on the assets in the vehicle.

Following the latest findings, ICI has agreed together with the fund's trustees to bring forward the date of the next retrospective valuation of the fund by a year.