Balfour Beatty's pensions deficit increases 60%
The total funding shortfall across Balfour Beatty's pension schemes rose by £85m to £231m over the course of 2016, driven by interest rate falls and contraction in credit spreads.
Out of the several defined benefit (DB) schemes that the infrastructure company sponsors, its liabilities from the Railways Pension Scheme increased the most over the year by £100m. This more than offset a rise in assets, and led to the deficit increasing from £51m in 2015 to £113m.
Meanwhile, the deficit in the Balfour Beatty Pension Fund (BBPF) rose to £62m from £43m in 2015.
These figures are presented in the company's latest report and are based on the IAS 19 accounting assumptions.
The report said: "The increase in pension deficit in the year is largely due to a reduction in long-term interest rates and a contraction in credit spreads. Although the scheme obligations increased, the hedging programmes put in place offset a significant element of this change with an increase in scheme assets."
As a result of the 31 March 2016 triennial funding valuation for the BBPF, Balfour Beatty agreed to make cash contributions totalling £182m over the next eight years.
These payments include contributions related to the asset-backed contributions structure set up in 2015 to help plug the scheme's funding deficit. The company will transfer additional assets worth up to £87m by 2019 into the structure.
The BBPF is now expected to reach self-sufficiency during 2027, some three years earlier than previously planned.
The company has also agreed to amend the existing dividend sharing mechanism so that if the dividend cover ratio is below an agreed trigger level then the contributions may need to be accelerated.
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