European-headquartered companies are on track to close the deficits of their UK pension funds sooner than their British counterparts, according to Barnett Waddingham.
Continental companies are paying an average of £5,700 (€6,682) per employee into schemes they sponsor in the UK, the consultancy firm found, versus £2,400 on average for FTSE350-listed companies.
This meant European firms could close their accounting deficits “in about six years”, Barnett Waddingham said, “nearly a year ahead of the FTSE350”. This is despite the cost of operating defined benefit (DB) schemes making up a greater proportion of total staff costs for European companies.
“While UK subsidiaries only contribute 6% of global revenue, they account for 30% of global DB pension obligations,” Barnett Waddingham added.
The consultancy firm analysed 75 UK-based DB schemes attached to companies located in Denmark, France, Italy, Germany, the Netherlands, Norway, Spain, and Sweden. The schemes had aggregated liabilities of more than £100bn (€117.3bn), based on data up to 31 December 2015.
Andrew Vaughan, partner at Barnett Waddingham, said: “These figures raise an interesting question as to why are European companies with UK final salary pensions paying proportionately more than their UK counterparts to fund deficits?
“One possible explanation is that European headquartered companies have tended to adopt a more cautious approach globally to managing their pension obligations. It will be interesting to see how this pans out post-Brexit.”
In 2015, the 75 companies contributed £1.6bn in total to their UK schemes, broken down as follows:
|Spain and Italy