FTSE250 Companies Struggle Under Pension Debt
A report by JLT Employee Benefits has found that one in ten FTSE250 companies is struggling with a “worrying amount of pension debt”. The report found that 23 companies listed on the FTSE250 where “faltering” under pension obligations worth a total of £4.7bn. To put that into perspective those 23 companies would have to forgo more than two years’ worth of dividends to fully fund their Defined Benefit pension schemes. A further 68 companies would need to redirect at least a full year's worth of dividends to settle outstanding pension obligations.
Whilst such levels of debt have obvious and profound impacts on the value of equity in these companies they also present an added degree of risk to those whose retirement savings are invested in these defined benefit schemes. Not only must retirees look at their pension pots and judge whether they have enough to retire but they also have to consider whether the company administering their defined benefit scheme has the funds available to finance their pension now and into the future. Particularly following the high profile collapse of the BHS pension scheme those who are members of any type of corporate pension plan should be paying close attention to what that company is doing to not only constrain but also reduce its pension debt to a manageable size.
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