DB sponsors fear scheme impact
UK - Research suggests nine out of 10 companies with a defined benefit (DB) pension fund are worried about the impact their scheme will have on the business.
Consulting firm PricewaterhouseCoopers said of the 98 companies - including around 30 FTSE100 organisations - it surveyed, 90% were concerned the scheme's trustees would ask them to increase cash funding to the scheme now they can least afford it.
Authors of the report said the demand for cash is driven by trustees' perception of the health of UK businesses together with a misinterpretation of the Pensions Regulator's stance on scheme funding.
A third of companies are therefore planning to take greater control of pension funding negotiations than they have in previous years, claimed PricewaterhouseCoopers.
The research found companies' desire to reduce or remove their pension risks has substantially increased,so firms are looking at redesigning the benefits members accrue and considering a pension buyout.
Around 17% of the companies questioned said they planned to close their final salary pension schemes to future accruals for existing members, while 80% have already closed the scheme to new staff.
At the same time, however, almost one in five respondents (18%) admitted they did not fully understand the impact their pension scheme had on their wider business.
Marc Hommel, partner and UK pensions leader at PricewaterhouseCoopers, said: "The pension scheme is the largest creditor for many UK businesses and its potential impact on a business' robustness and even survival cannot be ignored.
"With the cost of capital soaring and a paucity of available debt refinancing, it is essential companies address their UK pensions commitments as part of their overall need to restructure, renew or renegotiate their finance facilities."
Consultancy company Watson Wyatt has also warned new statistics showing a sharp increase in the number of corporate insolvencies underline the need for pension fund trustees to assess companies' abilities to meet their long-term pension commitments.
Sean Weaver, a senior consultant at Watson Wyatt, said: "Casualties from the recession are mounting and the wave of insolvencies predicted for 2009 will almost certainly include defined benefit scheme sponsors."
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