Firms still struggling to make pension burdens sustainable

COMPANIES are failing to reduce their pension burdens, according to a report by PricewaterhouseCoopers (PwC).

The research found that FTSE350 companies had generally made their defined benefit programmes no more sustainable since 2011.

Before the financial crisis, PwC judged that the same schemes had much more reliable financial support, making up a smaller proportion of companies’ liabilities.

PwC also drew attention to poor growth, above-target inflation and low interest rates as reasons why companies were still finding it difficult to fulfil their long-term obligations to retired workers.

“Pension schemes remain a huge financial burden on many companies’ balance sheets and the situation is unlikely to improve without real action from sponsors and trustees,” said Jonathon Land, pensions credit advisory partner at PwC. “The slow economy means pension schemes cannot afford to stand still”.

Pensions would have suffered even further if a recent pension solvency plan by the European Commission had gone ahead, according to the report.

The report estimates that the IORP II directive would have set back the sustainability of UK pension schemes by four years.