Research from Barnett Waddingham, the UK’s largest independent provider of actuarial, administration and consultancy services, reveals that financial companies in the FTSE350 paid £2bn in deficit contributions in 2015 – an increase from 2014.
Barnett Waddingham’s annual research on FTSE350 companies highlights the impact defined benefit pension schemes are having on UK businesses. The key findings specific to the financial sector include:
- The financial sector saw disclosed accounting deficits fall by nearly £4bn in 2015 – aggregate deficits in the sector were around £2bn
- 15p in DB deficit contributions paid for every £1 returned to shareholders
- In 2015, over one third of companies in the Financial sector were paying more than their free cashflow towards deficit contributions
- The financial sector had the smallest deficit as a proportion of market cap (less than 2%)
- The aggregate amount paid towards reducing DB deficits in 2015 represented 38 pence for every £1 spent on pension provision
Nick Griggs, head of corporate consulting at Barnett Waddingham, commented: “Our research shows the significant impact pension deficits are having on the financial sector. The sectors deficit contributions increased in 2015 and given the movements in financial markets over the last six months, and the implications of Brexit, there could be further increases.”
“The financial sector has been under increased scrutiny since the financial crisis and the future funding needed to meet DB pension obligations is another unwelcome area of uncertainty magnified by the vote to leave the EU.
“FTSE350 companies play an important part in supporting their former employees in their retirement with payments of over £20bn being made to pensioners in 2015. A significant amount when compared to the c£90bn paid by the Government in State Pensions.”