Renewed confidence in the economy is not yet manifesting itself in more manageable pension deficits, PricewaterhouseCoopers has said today
Publishing its Pension Support Index, the consultants noted that companies' ability to support defined benefit pension obligations had stalled and showed little sign of improving. As a result, pension stakeholders needed to take a more proactive and joined-up approach to managing risk, PwC said.
The index tracks the overall level of support provided to DB schemes by FTSE 350 firms. This currently stands at 76 out of a possible score of 100, an improvement on the low of 64 recorded in March 2009, but still far off the peak of 88 seen in the pre-recession period.
Steven Dicker, pensions partner at PwC, said: 'Given the continued economic uncertainty, pension stakeholders can't simply wait and hope for improvements to their pension scheme's position. They need to get proactive and look for ways to improve their investment performance and more innovative funding mechanisms such as asset-backed contributions to provide continued security to the scheme.
'Without action, defined benefit pensions obligations will remain a huge drag on companies' balance sheets and could halt their growth prospects.'
Jonathon Land, PwC pensions credit advisory partner, added that The Pensions Regulator's focus on helping schemes take a more joined-up approach to investment, funding and covenant would reduce the risks DB schemes pose to companies.
He said: 'Pension schemes' strategic decisions should be based on the level of risk their employer covenant can support, the contributions an employer can afford and sustainable investment in the long-term future of the company.
'This will lead to a more collaborative approach between employers and trustees, and better alignment with a company's future business plans.'
