Research by pension consultants Barnett Waddingham has found that utilities firms within the FTSE 350 were one of a minority of sectors to see their combined pension deficits increase in 2013. The total deficit for the sector was £3bn compared with £2.2bn twelve months previously.
Barnett Waddingham’s annual research on FTSE 350 companies highlights the impact defined benefit (DB) - or final salary - pension schemes are having on UK businesses. The key findings specific to the utilities sector include:
- Firms in the sector paid the highest amount of deficit contributions as a proportion of their available cashflow (over 50%).
- A majority of companies in the Sector (4 out of 7) were paying deficit contributions that exceeded available cashflow.
- In total Utilities companies in the FTSE 350 paid £560 million towards DB pension deficits in 2013, down from £660 million in 2012.
- 3 out of the 7 companies in the sector were paying more per head in deficit contributions than they were towards future pension provision.
Head of Corporate Consulting at Barnett Waddingham, Nick Griggs, commented:
“Whilst the increase in combined deficits could be viewed as a quirk due to the majority of constituents reporting with a March year-end, the relative scale of deficit contributions for the majority of companies within the utilities sector can’t be ignored. Despite the significant cash contributions in recent years, it is still a struggle to keep deficits under control.”
The research project, carried out with input from the Centre for Global Finance at the University of the West of England, will allow businesses with DB schemes to benchmark themselves against their peers.
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