A survey reveals that pension schemes are having an adverse affect on 52% of UK companies, negatively impacting profitability, financial health and the ability to invest in new projects. The survey by SEI Investments, a provider of investment and technology solutions, is its 8th survey among pension funds globally.
When asked to identify which areas were taking the hit, 71% of the CFOs, CEOs and senior financial officers surveyed said profitability was being affected while almost a third said their pensions liabilities had caused a reduction in both their share price and dividend payouts. Shoring up pensions deficits has also resulted in reduced investment in new initiatives, as reported by 19%, while 16% said it was resulting in cash flow problems.
To counter these and future problems, 86% of the sample are either adjusting or considering adjusting their investment strategy and 82% are either increasing or considering an increase to their pension contributions. A third have already converted to DC schemes and a quarter have or are considering switching to a different type of defined benefit scheme. Furthermore, 8% have already reduced benefits and the same percentage is giving consideration to doing so in the future.
Respondents were also canvassed on their opinions on advisers. Of those surveyed over a third stated that they believe that they have to liaise with too many parties to get a complete picture of their pension scheme and 57% said that they have to rely on advisers more than they would like to. Almost half believe that advisers are insufficiently accountable for the implementation of the advice they provide. Moreover 40% believe that their ability to understand the advice given by advisers is hampered by the approach and language they use to communicate.
Patrick Disney, Head of European Business at SEI Investments, comments: “It is clear that pension fund deficits are becoming an increasingly pressing issue for UK companies. As this survey demonstrates pension fund shortfalls are causing far-reaching problems for the corporate health of some organisations. While most companies seek expert advice to help with the running of their pension funds, they feel that the advisors involved lack sufficient accountability. To protect both the well-being of their businesses and also the future security of scheme members, companies need to take control of pensions and their impact on corporate finances yet it clear that to get that control companies must look at things differently and adopt new management strategies.”
