UK - Pest control firm Rentokil Initial, which is the process of closing its defined benefit pension fund, has revealed more details about the scheme's switch into bonds.
The Rentokil Initial Pension Scheme has effectively reversed the asset mix to 20% equities and 80% fixed income. It also entered a series of hedges to reduce the fund's risk exposure.
This is the second step taken by the company to address the £349m deficit in its pension scheme which arose last year as a result of more conservative mortality assumptions, Rentokil said.
In December 2005 the company invested £200m to protect already accrued pensions.
Next Rentokil will close the fund as of the end of this month and offer employees a defined contribution scheme instead.
Rentokil was among the first UK companies to announce the end of its DB scheme last year "in response to a general trend of increasing longevity which has adversely impacted the scheme", the company said in 2005.
At the end of 2005 the deficit was £169.8m. According to the company's half-year report it was, however, "reduced during the first half of 2006 as a result of favourable movements in equity prices in the first quarter, movements in implied inflation and interest rates prior to the hedges being put in place and movements in discounts rates".
The remaining deficit will be met by a series of payments to be made by 2012. No details were given and Rentokil refused to comment on the report.
It is, however, assumed that the total funding required to address the deficit will be between £370m-380m.
Overall, the company reported that profit from continuing operations dropped to £75m from almost £81m last year.