The latest round of company interim reports from FTSE 350 companies show that Defined Benefit Pension Schemes continue to be a thorn in their cash flow, that isn’t going away anytime soon.

What is a Pension Shortfall?

A pension shortfall is where a company offering employees a defined benefit pension plan does not have enough money to to cover its current and future obligation. The pension shortfall normal happens when the investments selected by the pension fund manager did not perform as expected. A pension with a shortfall is considered underfunded.

FTSE 350 Pension deficit falls to £38bn

A recent Pensions Risk Survey by Mercer found that Defined Benefit Pension liability values had fallen by £1bn to £882bn, while asset values had increased by £2bn to £844bn.

Dixons Carphone Pension Deficit

Dixons Carphone’s defined benefit pension scheme deficit has increased by £71m year-on-year to £585m. DB scheme assets totalled £1,324m, up by around £180m year-on-year, while the pension scheme liabilities increased by around £350m to £1,909m during the same period.

Mr Kipling offers 25% enhanced pension transfers values

RHM is the company behind Hovis bread, Bisto Gravy, Mr Kipling cakes & Premier Foods offers its defined benefit pension scheme members a ‘25% enhancement’ to their current transfer value. Premier Foods slid to a £42.7 million annual loss earlier this year as it was hit by pension charges and restructuring costs.

Centrica cut its dividend by more than half citing Pension Contributions

Centrica cut its dividend by more than half cited “additional pension contributions”. Centrica pension scheme deficit is running at £1.4bn following its recent valuation. Centrica’s overall deficit contributions will fall to £175m a year from 2020 to 2025 before “a balancing payment of £93m in 2026”. The pension payments are likely to represent a fairly sizeable proportion of its full-year cash flow.

Transferring out of Defined Benefit Pension Schemes

Since the introduction of pension freedom regulations many employees are being offered Enhanced Defined Benefit Pension Transfer values.

Need help? Grove Pensions Solutions are specialists in offering FCA regulated Defined Benefit Pension Transfer advice. Find out more about our Defined Benefit Pension Transfer Service here.