The majority of European countries have recorded increased underfunded pension ratios from 2015 to 2016, MSCI has revealed.

According to its MSCI Global Pension Underfunding Concerns report, percentage change in underfunding ratios from 2015 to 2016 saw Finland’s ratio increase by 27.2 per cent, closely followed by Switzerland with 24.1 per cent, Greece also rose by 16.8 per cent. France, Belgium, Spain, Germany, Sweden, Denmark, Luxembourg, Norway, Austria and Great Britain all scored between 2.8 and 10 per cent.

Italy, Portugal and Ireland’s funding ratios were the only funds to improve by -1.9 per cent, 0.8 per cent and 0.5 per cent, respectively.

The MSCI report examined the pension funding status of 1460 companies with defined benefit schemes, reporting speculation on Europe’s pension funds within the Western European region. The overall level of underfunded pension liabilities for the 18 countries in the sample was 4.7 per cent.

Germany, Switzerland, Luxembourg and Great Britain had the largest proportion of companies flagged for having the highest underfunded ratios ranging from 38 to 31 per cent. These countries along with Belgium scored the worst when measured by the overall average underfunding ratios for the country.

On a country level, the worst underfunding ratios in Europe ranged between 6.9 per cent and 7.8 per cent in comparison the overage average of 4.7 per cent.

As part of its all country wide index, the MSCI report found that the companies with the highest underfunding ratio in Europe include German firms: Evonik Industries AG with 29 per cent and Bayer Aktiengesellschaft with 26 per cent liabilities. Also, BT Group and BAE Systems had the highest underfunded pension in Great Britain with 36 per cent and 30 per cent, respectively. Electricite de France had an underfunded revenue of 30 per cent, Solvay, Belgium had a 27 per cent liability and both CaixaBank in Spain and Swisscom in Switzerland scored highest in their countries with a 26 per cent liability.

The report also indicated that there is significant variation in asset allocations among pension plans globally depending on national pension regulations. The risk of pension shortfalls in DB schemes have been recorded as a result of retirees living longer, very low interest rates globally, lower realised stock market returns and not having set aside sufficient funds to meet obligations.

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