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IPE special report May 2018

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Summary of today’s UK pension deficit disclosures

UK – With several large UK companies reporting their pension liabilities alongside their 2002 earnings today, here is a summary of the main points.

AMEC
Construction firm AMEC says its pension schemes are “well funded” though declining markets reduced the surplus in the schemes to around 100 million pounds as at December 31. It expects to introduce the new FRS17 accounting standard in 2005.

UK COAL
Mining firm UK Coal says: “The significant fall in equity markets during 2002 has resulted in a decline in the net assets of the defined benefit pensions schemes.” It says that under FRS17 the gross shortfall is 108.1 million pounds, compared to 43.5 million in 2001. The next actuarial valuation will be carried out in December 2003.

The company has a mixture of pension funds including money purchase and two defined benefit schemes. The DB schemes were closed to new entrants since January 1995.


ARRIVA
Transportation company Arriva says it expects a 20 million pound charge to its profit and loss account in 2003 resulting from its defined benefit schemes, an increase of 12 million pounds on the 2002 figure. “This primarily reflects the deterioration in the performance of the equity markets.” It would raise its cash contribution from 11 million pounds to 13 million pounds in 2003.

P&O
Shipping firm P&O says that it has a total pension deficit of 273 million pounds under FRS17. “Under FRS17, the deficit on our main UK pension scheme is currently assessed at
252 million pounds and on our other schemes at 21 million pounds." It said that the next actuarial valuation of the main scheme would take place later this year, when “liabilities will be valued at a discount rate that reflects the expected return on the assets”. “It is therefore likely to lead to a lower
deficit.”

It said the annual service cost is unlikely to rise substantially though the deficit would “need to be addressed by additional contributions”.

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