UK - Approximately 50% of FTSE 100 companies are capable of paying off the whole of their pensions deficits within a year using existing disposable income, research by KPMG has found.
Based on a comparative analysis of FTSE 100 company deficits against surplus cash flow estimates, KPMG’s Pensions Repayment Monitor also suggested over 70% are able to clear pensions deficits within three years.
However the research discovered 20% may need to contemplate additional measures in order to pay off their pension deficits over a longer time scale.
Whilst the research showed the majority of the FTSE 100 are not on the brink of a pensions crisis, the accountancy firm said it believed they were still facing a compressed timeline within which to make crucial decisions for both their pension funds and future growth prospects.
Simon Collins (pictured), CEO of KPMG’s corporate finance practice, warned: “UK companies need to take back control of the pensions issue. Trustees have onerous new responsibilities and are rightly keen to ensure that pensions deficits are high on the board’s agenda. But this is sometimes confused with pressing the panic button and immediately paying down deficits, which is often neither workable nor desirable in practice.”
The report also illustrated how - across the FTSE 100 - funding options to deal with pension deficits are more problematic for different sectors.
For example KPMG claimed companies operating in heavily regulated sectors, such as utilities, have found themselves facing a “pincer movement” of regulatory challenges suggesting they are squeezed between the sector watchdog prohibiting price and the Pensions Regulator encouraging the repayment of funds.
Alastair McLeish, head of pensions at KPMG, said: “Companies must ensure that both their funding and investment decisions take account of variables that can affect the value of a pension fund and the impact of cash diverted towards a fund.
By Daniel Flatt
PwC, KPMG, EY and Deloitte must break up their consultancy and audit businesses into distinct firms to provide greater focus on the "most challenging and objective audits", the competition watchdog has said.
The Department for Work and Pensions (DWP) has released its first batch of guidance setting out how the guaranteed minimum pension (GMP) conversion legislation may be used to resolve unequal payments.
This week's top stories include the government spending £800,000 on a Gogglebox advert and MPs writing to The Pensions Regulator about its engagement with the Railways Pension Scheme.