UK - Pension funds could suffer if companies use bond issues to plug holes in their final salary scheme, a consultant warns.
Marks & Spencer has issued a £400m bond issue to cover a £1bn deficit in its final salary scheme and last year BP issued corporate debt to help fund a £790m cash injection.
But if trustees put some or all of the proceeds from a bond issue into equities, the strategy could backfire, Hewitt Bacon & Woodrow associate Martin Kraus warns.
He said: “It is not very secure to put it in the stock market. If trustees put the proceeds in bonds instead of equities then they are more closely matching the liabilities of the scheme which is less risky.”
The secretary of state for work and pensions has told MPs clawback and avoidance measures could be imposed for the people responsible for driving Carillion over the cliff.
Occupational pension provision has continued to grow in value, but there remains large variance in incomes across the pensioner age group, according to latest government data.
Defined benefit (DB) schemes could have an aggregate surplus by 2021 under Pension Protection Fund (PPF) projections, its strategic plan for 2018 to 2021 reveals.
Investment consultants are failing to recommend products that outperform net of fees, the Competition and Markets Authority (CMA) has said as its investigation into the market continues.