UK blue chips continue to prioritise dividend payments continue over the reduction of pension deficits, a recent report shows.
Throughout the last year, only 5% of FTSE 100 companies had reported higher pension contributions than dividend payments, despite the fact that more than a third, 37 firms in the index could have settled their pension deficit in full with just one year’s worth of dividend paytments, JLT Employee Benefits revealed.
Overall, FTSE100 firms paid £14.8bn in deficit contributions as of March 2018, compared to £17.4bn the previous year.
One reason behind firms taking a more lax stance on deficit payments could be improving gilt yields, which have contributed to a marginal decline in overall deficit levels at FSE100 firms, which are now at £33bn, compared to £35bn last year.
Yet Charles Cowling, chief actuary at JLT warns firms against taking a relaxed stance: “Looking ahead, balance sheet resilience could be crucial over the coming months as we approach the Brexit deadline. Corporate sponsors and schemes should think carefully about their risk exposures through a period of heightened political and potential market volatility.”
The Pensions Regulator had earlier expressed concerns over the growing mismatch between pension deficit contributions and dividend payments.
Speaking at the annual PLSA conference in Liverpool, TPR chief executive Lesley Titcomb pledged “higher regulatory scrutiny” but did not commit to enforcing a fixed minimum ratio for deficit contributions.
