UK - Pension scheme liabilities are having a negative impact on UK companies' profitability, financial health and ability to invest in new projects, a new survey by SEI Investments has found.
The survey revealed 52% of UK companies were being adversely affected by their pension scheme’s liabilities.
According to SEI, 71% of CFOs, CEOs and senior financial officers reported profitability as the area hit hardest while a third said their pension liabilities had caused a reduction in both their share price and dividend payouts. Shoring up pension deficits has also resulted in reduced investment in new initiatives, as reported by 19%, while 16% said it was resulting in cash flow problems.
“As this survey demonstrates pension fund shortfalls are causing far-reaching problems for the corporate health of some organisations,” said Patrick Disney, head of European business at SEI.
“While most companies seek expert advice to help with the running of their pension funds, they feel that the advisers involved lack sufficient accountability. To protect both the well-being of their businesses and also the future security of scheme members, companies need to take control of pensions and their impact on corporate finances yet it’s clear that to get that control companies must look at things differently and adopt new management strategies.”
The survey found these problems had caused a third of respondents to convert to DC schemes while a quarter have or are considering switching to a different type of DB scheme.
To counter the problems, 86% are either adjusting or considering adjusting their investment strategy and 82% are either increasing or considering an increase to their pension contributions.
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