DATA CRUNCH
Pension deficit warning signs Stocks with a large DB pension deficit relative to their market cap
Greencore Group Severn Trent
Smurfit Kappa Group Rhi Magnesita Capita
TI Fluid Systems Tesco
Melrose Industries TUI
Morgan Advanced Materials BAE Systems Norcros
De La Rue McBride
Dixons Carphone Pendragon BT Group Lookers
01020304050 %
UK dividends have grown by more than contributions
Aggregate dividends compared with pension contributions Total dividends
Total pension contributions
120,000 150,000
30,000 60,000 90,000
0 2008 2009 2010 Source: Liberum 2011 2012 2013 Year 2014 2015 2016 2017 2018
tell you if the pension scheme could become a significant issue for management. “For this, you need to understand the absolute size of the assets and liabilities of the pension scheme, not just the difference between the two.” Similarly, Marian Elliott, managing director at Redington, suggests a pension deficit might be high relative to the size of the company’s equity as a result of corporate transactions, historic investment and hedging strategies, or a reduction in the size of the company over time in the normal run of business. She continues: “We work with
several schemes where the size of the deficit used to be high relative to the sponsor, but they have managed to reduce this significantly and have a viable plan in place to return to full funding without undue reliance on the employer.”
Companies can expect regulatory intervention Indeed, the Pensions Regulator has been vocal about companies not prioritising dividends over pension contributions. “You can be pretty sure that
those companies will be under close scrutiny by the Pensions Regulator because if the risk signs are there the regulator wants to be close to the discussions between the employer and the trustee on how much money is going into the pension scheme,” says Mr Cowling. Mr Cowling adds: “If companies
want to put up dividends, if they have pension scheme issues, then they better be putting up pension contributions as well.” While TPR has yet to define
an absolute funded status limit for regulatory intervention, it is clearly continuing to focus on dividends and other cash returns to investors versus payments to the pension scheme.
41
£bn
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
