UK - Media giant Granada and plastics and wire producer Carclo have both ended lengthy contribution holidays in a bid to cut mounting pension scheme deficits.
Granada’s £1bn scheme has seen its FRS17 deficit balloon to £267m and will resume contributions at 23% of pensionable salaries – equivalent to £20m per annum – as well as an additional £10m lump sum payment to the scheme.
The firm blamed volatile equity markets for its FRS17 deficit, which stood at £76m at the beginning of the year, when the scheme closed to new members.
At this time the scheme was 100% invested in equities, but it has since moved 18% of its assets into bonds following advice from Mercer Human Resource Consulting, and will next year increase this to 22.5% to reflect changes in its membership profile.
The firm went through a restructuring last year, which resulted in a “significant” reduction in the number of active members. It currently has 2800 members, 7900 pensioners and 9910 deferred members.
One city analyst said: “For a fund that is as mature as Granada’s, only holding 22.5% in fixed income looks light.
“Why do they have such a large equity weighting? It is this which has led to its increased deficit and things have deteriorated since then, so Granada will have to continue paying contributions for the duration.”
Meanwhile Carclo has ended a six-year contribution holiday to finance a £10m deficit on its two £120m DB schemes.
Its interim financial results reveal that it will resume contributions worth £1.6m this year and £900,000 in 2003/2004.
The company also revealed that the deficit and subsequent increased charges would decrease underlying operating profits by 18.8% to £2.8m.
Finance director Chris Mawe said: “The last actuarial evaluation showed the funds to be in balance.
“Since then, the market has declined and the schemes have gone into deficit.”
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