Pensions deficits grow to €1.7bn at Philips
GLOBAL - Philips, the electronics manufacturer, has reported the deficit on its defined benefits pensions plans now stands at over €1.7bn globally as a result of negative market activity in the last six months.
Details of the firm's second quarter and first half financial report stated, for the first time, that its collective pensions liability is short of €1.768bn, largely through negative returns on investments and driven in the main by activity on its Dutch pension plan.
Note 18 of the H1 2009 report, which reflects IAS34 reporting, said the gross actuarial loss to the "principal" pension plans, including a change in the effect of a cap on prepaid pensions, was €2.381bn but a tax benefit instead reduced the global deficit to just €1.7bn.
This is even though figures suggest the actual investment loss experienced by Philips' principal schemes is lower than that seen in the first half of last year. Philips has estimated a potential loss on investments of €552m - the bulk of which is a €379m loss for the Netherlands scheme - compared with a loss of €580m in the first half of 2008 and a €384m negative return for the Dutch scheme in that period.
The principal pension plan data covers funding, gains and losses for the UK, US and the Netherlands pension plans as they make up approximately 90% of Philips' defined benefit pensions assets and liabilities for the group.
The funded status of principal plans also dropped significantly according to figures presented, as the schemes were worth €1.815bn at the end of December 2008 but were worth €323m by 28 June 2009.
The schemes are said to have unrecognised assets of €1.594bn in that period compared with €782m at the end of 2008.
The service cost of pensions to the company is also lower this year, dropping from €112m in H2 2008 to €98m in the last six months.
Net cash paid into plans has also increased a fraction since last year, as the total sum contributed between January and the end of June was €204m, compared with €176m in the same period in 2008.
Defined contribution plans, on the other hand, cost the electronics firm €56m in the first half compared with €48m last year.
The group's Dutch pension fund had assets under management of €12.5bn at the end of March 2009. (See earlier IPE article: Philips scheme sees limited cover fall)
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email firstname.lastname@example.org