Companies underestimate pension obligations

LONDON (Reuters) - Top European firms are underestimating their pension obligations by 300 billion euros (270 billion pounds), led by Royal Bank of Scotland and Lloyds Banking Group, according to a study.

Lloyds (LLOY.L) has underestimated its obligations by 14.2 billion euros, more than any other European company, followed by RBS, which has unrecognised liabilities of 13.3 billion euros, according to calculations by equity research firm AlphaValue.

Lloyds and RBS (RBS.L) are, respectively, 43 percent- and 70 percent-owned by the state after receiving taxpayer-funded bailouts during last year's banking crisis.

The third-biggest underestimation is at British Airways (BAY.L), currently in the process of merging with Spanish rival Iberia (IBLA.MC), AlphaValue said.

The size of BA's pension deficit, currently being reviewed by the airline and its retirement fund trustees, could yet derail the tie-up between the two carriers, with Iberia reserving the right to back out if the shortfall is bigger than expected.

According to AlphaValue, the British carrier's true pensions obligation is 10.5 billion euros higher than the company's own estimate.

AlphaValue said many companies had underestimated their true pension obligations by assuming a low level of wage inflation, and by adopting a high discount rate in calculating the present value of future payouts.

The combined pensions deficit of 430 major listed European firms rose 22 percent to 280 billion euros last year, according to the companies' own calculations, AlphaValue said.

That left an additional unacknowledged pension obligation of 300 billion euros, equivalent to 9 percent of the shareholders' equity in the companies, it added.

(Reporting by Myles Neligan; editing by Simon Jessop)