Lloyds’ £31.3 billion pension liability

State-owned Lloyds Banking Group is reported to have a pension liability of £31.3 billion as of the end of 2012 – the third largest of all UK firms.

Lloyds’ £31.3 billion pension liabilityThe report was carried out by Lane Clark & Peacock, a financial, actuarial and business consultancy.

The figure is a substantial increase from the £28.2 billion reported at the end of the previous year.

The story so far

Lloyds is now partially owned by the government, after its £20.5 billion bailout in 2008 during the height of the financial crisis.

However, The Financial Times reports it is currently well placed to fund these liabilities, and only placed 15th in a list of the deficits of FTSE 100 companies.

Only last week the company was taking tentative steps to begin dividend payouts to its shareholders, which it was banned from doing since the bailouts needed in the financial crisis.

Yet now this decision may be countered due to the extent of the pension liabilities.

The broader picture

Overall, despite record contributions, the Lane Clark & Peacock survey reported that pension schemes were less funded then they were in 2011.

The increasing sums needed to fill these pension deficits mean various multinational companies are seeking substitutes to cash funding, including inter-company guarantees and covenant protections.

Many schemes have also been hiking their assumptions for life expectancy, in line with the collation government’s plans to raise the state pension start date (which has been set at 65 years for men and 60 years for women) dramatically – potentially as high as 77.

What the future holds

Yet it should be noted a comeback might be on the horizon for the Lloyds, and Britain is expected to make a profit when it sells part of its 39% stake, possibly at the end of next month.

Whilst predicting a company’s results are as volatile as a game of roulette, the bank has enjoyed a sudden turnaround – and is now expected to report profits of around £2.6 billion for 2013.

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