ICI sets aside E360m for pension contingencies

UK – Chemicals firm ICI has set aside 250 million pounds (360 million euros) in a contingency fund to help it meet its pension liabilities, the firm’s benefits director says.

David Birtwistle, international benefits director of at ICI explained that the firm, following a 'major business transformation' in the mid-1990s, had accumulated eight billion pounds-worth of pension liability, versus its three billion-pound market capitalisation.

He told a conference that the situation had led to a “focus on risk reduction”. The pension scheme, closed to new entrants n 2000, today allocates about 20% to equities with the rest in bonds.

As its solvency ratio was around 98% in 2003, the company has set up a 250 million-pound contingency fund which meets trustees’ requirement for security.

This vehicle, set up as a subsidiary of ICI, gives the pension fund the status of 'senior creditor' – meaning that it would have priority of claim in case of bankruptcy.

The company’s financial strength has improved, Birtwistle said, adding that consultation with banks and credit ratings have revealed that they see the solution as “acceptable within limits”.

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