UK - Tougher scheme wind-up rules could "hammer" company credit ratings, consultant Lane Clark & Peacock warns.
Under the government’s drive to improve protection for members, all solvent companies will be held to their pension promises and be made to pay buyout costs in full on scheme wind-up.
But LCP warned that one of the unintended consequences of this additional protection would be a dramatic increase in company liabilities.
Partner Jeremy Dell said: “Credit rating agencies and analysts increasingly look at pensions deficits as debt.
“As liability on wind-up becomes more onerous, it is inevitable that credit ratings will take a hammering.”
The Actuarial Profession agreed. It said employers under pressure to abandon their schemes would be hit hard by rating agencies – and the option to “cut and run” would come at a very high price.
Institute and Faculty of Actuaries deputy chairman of the pensions board Wendy Beaver said: “The price is that employers are now liable for their share of a total potential shortfall of some £300bn.”
The government estimates the costs of these changes to employers will be £50m-£100m.
But industry experts believe this figure is “absurd”.
Mercer Human Resource Consulting European partner Tim Keogh said: “The government’s estimate is absurdly low. The true increase in potential liability is more like £100bn.”
Hewitt Bacon & Woodrow senior consultant Kevin Wesbroom added: “In deciding between greater protection for members or additional burdens on business, the government has come down firmly in favour of the members.
“This might be no more than members should expect, but the lack of actions to help employers manage their way out of the current crisis is disappointing”.
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