UK roundup: Headlam Group, enhanced transfer value, Persimmon
UK - Construction company Headlam Group has seen its pension deficit halved by the use of an enhanced transfer value (ETV) exercise, as well as additional contributions to the scheme.
According to its half-yearly report, the company’s defined benefit scheme reported a deficit of £11.5m (€13m) at the end of March, following its latest triennial valuation.
In the report, Headlam said: “The company has agreed with the trustee to maintain additional contributions in line with the arrangement introduced in 2008, which means that each year’s contribution will continue to increase on the previous year at a rate of 3.2%.”
It added that the current pace would likely see the plan deficit eliminated by the end of 2015, having stood at £22.4m in March 2008.
The company’s pension costs more than doubled to £4.7m in the six months to June, with 70% of the expense down to the ETV exercise launched. A further £1.4m was paid in additional plan contributions.
Research recently conducted by KPMG predicted that £100bn in liabilities could be cut from private sector DB schemes through the use of ETVs. The consultancy predicted that the next decade could see as many as 750,000 members transfer pension savings away from their former scheme, with KPMG pensions partner Mike Smedley saying the transfers had become a “key element” of de-risking strategies.
Meanwhile, house builder Persimmon has successfully switched its pension scheme from the retail price index (RPI) to the consumer price index (CPI), leading to gains of over £32m to the company.
Aided by the switch, which the company directors had been consulting on since before the end of last year, liabilities for its DB scheme have fallen from £395m to £365m in the 12 months to June, with the scheme deficit falling from £125m to £48.6m on back of asset growth as well as the fall in liabilities.
The company explained that due to the nature of its DB scheme, which had merged with several others following the acquisition of rival companies, it launched a review last year to assess whether it could change to the lower inflationary measure of CPI.
“No gain was recognised at 31 December 2010 as the directors were reviewing all pension obligations in detail to assess the effect of this change. During the period to 30 June 2011 the group has concluded its review of the rights to inflationary pension increases of its different groups of scheme members,” the report said.
The scheme further saw the deferred recognition of £12m in tax assets, boosting its funding level further.