Scheme liabilities jeopardise future of FTSE250 firms

A “significant number” of FTSE250 companies operate a pension scheme which represents a material risk to the business, analysis reveals.

Figures from JLT Pension Capital Strategies also show a number of FTSE250 pension schemes are in an unstable position. The index as a whole has a total pension scheme deficit of £10bn.

The firm said, while this was a £1bn improvement on last year about 10% of firms had disclosed pension liabilities greater than their equity market value.

Some 121 companies disclosed pension deficits in their annual accounts, with 27 reporting a surplus.

Employer moves to plug deficits resulted in a total of £1.6bn being pumped into schemes - up from £1.3bn last year. Construction firm Taylor Wimpey made the biggest contribution with a total of £122m.

JLT PCS said total disclosed liabilities of the FTSE250 had risen from £70bn to £75bn.

Managing director Charles Cowling said: "A number of FTSE250 schemes carry worryingly large deficits. The strategies of some pension schemes within the index could be addressed; we're seeing more trustee boards moving towards a risk-averse stance, protecting schemes from over-exposure to the stormy equity markets.

"Exposure to equities will continue to fall in favour of fixed income as schemes seek to de-risk. This move is important because of a significant minority of FTSE250 schemes could be viewed as considerably jeopardised by the extent of their liabilities."

Five companies had liabilities in excess of £1bn Invensys; FirstGroup;
Premier Foods; Phoenix Group; and Babcock International.

The average pension scheme asset allocation to bonds is 50%, an increase on the 48% allocation of last year. This signifies an 8 percentage point rise in bond allocation over three years, as trustees seek ways to de-risk.

In eight companies, pension scheme assets allocation to bonds has increased by more than 20%.