More UK companies are expected to adjust capital or cut dividends to fill growing holes in final salary pension schemes this year.
The discovery of huge pension deficits at Tata Steel (TISC.NS) and collapsed retailer BHS in 2016 caused scandals and drew attention to the widening gap between the assets held by such schemes and the money they owe to pensioners.
British government bonds, or gilts, have been the main assets of defined benefit or final salary pension schemes. But years of low UK interest rates and a flight to safe-haven investments after Britain’s June vote to exit the European Union have depressed yields, leaving shortfalls.
Several companies have taken steps in recent months to finance the deficits. Specialist plastics maker Carclo (C1Y.L) cut dividends, printing firm Communisis (CMS.L) reduced its capital base and fund manager Rathbone (RAT.L) raised capital. bit.ly/2j5flkc bit.ly/2ifbiNS bit.ly/2if0pM4
With FTSE 100 company pensions schemes now only 88 percent funded as at Jan 27, 2017, according to consultant Aon’s pension risk tracker, compared with 98 percent at end-2015, more companies are expected to follow suit.