Despite improvement, gap between 'winners and losers' has increased
FTSE 350 firms are now able to support their defined benefit funds at the same level as prior to the global financial crisis, analysis by PricewaterhouseCoopers shows.
The firm said it has taken a decade for the strength of sponsoring employers to return to a similar level as in 2007, with a score of 87 as of the end of 2017, according the firm's pension support index. At the end of 2007, the score was 88.
PwC's pension support index tracks the relationship between a company's financial strength and the size of its DB obligation. It rates the overall level of employer support available to those funds, considering operating profit, cash from operations and market capitalization vs. the estimated pension deficit, giving a score out of a possible 100.
However, the gap between those that are doing well and those struggling has increased, according to PwC's report outlining the analysis. Figures were not available.
The improvement in scores "masks the fact that there have been many winners and losers in 2017 within the FTSE 350," said Jonathon Land, pensions credit advisory leader, in the report. "Distress in the retail sector and political uncertainty have further exacerbated these variations. In the retail sector, changing market conditions have resulted in a number of high profile restructurings where trustees of pension schemes are impacted by either insolvencies or company voluntary arrangements. In many of these recent situations, trustees and the Pension Protection Fund (the lifeboat for insolvent companies' DB funds) have had a casting vote in the future of the sponsoring employers," he said.
PwC also warned that trustees need to consider the impact of the U.K.'s departure from the European Union on their pension funds. The report outlines a number of questions for trustees to consider regarding Brexit, their pension fund and sponsoring employer, including timelines and likely scenarios, mitigation options, and whether data analyses and impact assessments have been undertaken.