All open FTSE 250 defined benefit (DB) pension schemes could disappear within the next year, as employers struggle to keep pace with increasing liabilities.
According to analysis released today by JLT Employee Benefits, DB pension provisions in the FTSE 250 have fallen by around 16 per cent in the last year.
The total disclosed pension liabilities of DB schemes of FTSE 250 companies stood at £81bn at 30 June 2015, compared to £75bn a year earlier.
Meanwhile, the total deficit on DB schemes for the FTSE 250 for the same time period was £12bn, which is £3bn more than it was the year before, and only 28 companies revealed they were carrying a pension surplus in their most recent set of accounts, compared with 111 with a pension deficit.
“The ongoing spend and service costs on DB pensions before any allowance for deficit spending is a burden that many boardrooms would like to remove altogether,” said Charles Cowling, director at JLT Employee Benefits. “The impact on corporate decision-making for those companies with significant pension schemes liabilities should not be underestimated.
“With spiralling liabilities and yet more adverse regulations coming into effect from April, such as new tax rules and the end of contracting-out, we believe that the majority of FTSE 250 companies will cease DB pension provision to all employees within 12 months.”
According to JLT’s research, just 49 FTSE 250 companies are providing more than a handful of their employees with DB benefits and only 11 of those are providing DB benefits to a significant number of their employees, which JLT defines as incurring ongoing DB service costs worth more than five per cent of total payroll.
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JLT has previously warned of a trend away from DB schemes among FTSE 100 companies. Research published by JLT last December discovered that ongoing pension provision among this group of companies had dropped by 13 per cent in the year to 30 June 2015, with just 55 of the FTSE 100 providing DB benefits to more than a handful of employees.