Sponsoring employers often want to cut contributions in order to invest in their businesses - but should trustees agree to this? Our panel discusses the issues.
Professional Pensions has been tasked with advising a fictional chair of trustees who has a number of issues to deal with.
To help him, and in association with Pension Insurance Corporation (PIC), we have assembled a panel of experts; PIC co-head of business origination David Collinson, PwC partner and head of UK pensions Raj Mody, and Redington co-chief executive officer Dawid Konotey-Ahulu.
The first issue our chair of trustees has to deal with that is the sponsoring company wants to reduce deficit contributions and pay them over a longer period. It wants to invest in new technology it says is essential for the long-term profitability of the business. Should the trustee chairman agree?
The sponsor is currently successful and has enough cash on the balance sheet and cash flow to pay off the deficit (the plan is 80% funded) in three years. However, there are concerns about a new technology threat to the business which could see profits falling significantly in five years.
The sponsor would like to make the recovery plan 10 years, which would allow it to invest in new technology to give the business a more secure long term future. If the recovery plan is less than 10 years the company would have to borrow on a secured basis to fund the new technology at a cost of Libor plus 600 basis points.
Our panellists discuss the issues in the video above. To have your say on what the trustees should do, either comment below or send your thoughts to PP editor Jonathan Stapleton at [email protected].
This is the first part of the Trustee Chair Roundtable Series - sponsored by PIC. To view the other videos in this series, visit: www.professionalpensions.com/tag/pic-trustee-chair-roundtable-series
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