“When it comes to spiralling pension scheme deficits, German companies such Lufthansa are certainly not alone, UK companies too are facing the increasing costs of DB pension schemes.
“Falling gilt yields mean that liabilities could have increased by a third compared to three years ago and schemes’ assets are unlikely to have kept pace. Our research shows that in 2013, UK firms in the Consumer Discretionary sector paid £750 million towards DB pension deficits. This was equivalent to 40p of every £1 spent by these firms on pension contributions. An increasing deficit can be difficult to manage for employers facing other cost pressures and they may wish to look at alternative funding solutions, such as asset-backed contributions.
“If UK employers wish to reduce the risk of a scheme’s deficit increasing to an unaffordable level, managing liabilities is key. Employers may want to look at new opportunities which have arisen in the flexible pensions world. Employers sponsoring a DB scheme which is still open to future accrual also need to beware of a potential hike in National Insurance contributions following the end of contracting-out in 2016.”
|
