Pensions could hit firms' credit rating -Moody's

LONDON Jan 26 (Reuters) - Widening company pension deficits due to the global financial crisis could result in downgrades for corporate credit ratings, Moody's (MCO.N) said on Monday.

The credit ratings agency said in a preliminary study of the pension deficits of 20 companies, mostly in the UK, that pension deficits were "back on the agenda" as volatile markets wiped billions off pension assets.

Moody's said a further decline in pension assets in 2009 could "exert significant pressure on credit profiles", estimating that 2008 events could have given rise to a 15 to 20 percent fall in pension assets.

Defined benefit pension schemes must meet their pension liabilities regardless of how the market performs, and if their investments do not yield the necessary funds to meet those obligations, the sponsoring company is obliged to make further payments, stretching its balance sheet in difficult times.

The agency also noted that surpluses accrued in the boom market years, pension schemes' reduction in equity investments and the favourable currency effect on assets held by UK defined benefit pension plans contained last year's market deterioration.

Trevor Pijper, senior credit officer at Moody's and one of the report authors, said the rating agency expected markets to improve in 2009, limiting pension deficits.

A separate report by the UK National Association of Pension Funds published on Friday said the credit crisis could force 1,000 private sector defined benefit pension schemes to close to new members over the next five years. (Reporting by Cecilia Valente; Additional reporting by Raji Menon; Editing by Sharon Lindores)