UK - Chocolate manufacturer Thorntons has been forced to increase contributions to its final salary scheme to cut a widening deficit.
An actuarial valuation on the £22m Thorntons Pension & Life Assurance Scheme in June last year showed a £6.8m deficit – enough to cover just 76% of its liabilities.
Since then, the deficit has grown to £12.8m and means the scheme, which is closed to new members, can only meet 57% of its liabilities.
In July, Thorntons increased combined employer and employee contributions into its defined benefit scheme from 10.8% to 12.4%.
The rise means it will pay an extra £300,000 on top of the £1.6m it already contributes to the scheme.
A Thorntons’ spokesman confirmed it has also advised scheme members that a further increase in contributions would be needed in June next year to make up the shortfall.
Thorntons closed its defined benefit scheme to new members on August 1 in response to a combination of increasing costs and lower investment returns. New employees will enter a defined contribution scheme to which they must contribute 3.5% with Thorntons contributing 5%.
Thorntons, which has a market capitalisation of £70m, has debts of £37.2m following its 1998-2000 expansion programme. It is also facing rising retail rents.
A leading City analyst said: “The scheme members are genuinely at risk. They were pretty thinly covered a year ago and the scheme’s got 80% in equities, so whichever way you look at it, it’s not good news.
“Put the three problems together and Thorntons has got to sell chocolate by the barrow load to keep the plates spinning.”
A full FRS17 declaration will appear in Thorntons’ report and accounts which will be issued in three weeks.
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