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Pension stakeholders must be more proactive

Steven Dicker said that, given the continued economic uncertainty, pension stakeholders need to get proactive and find more innovative funding mechanisms, such as asset-backed contributions.

His comment followed analysis from the PwC’s Pensions Support Index, which revealed that FTSE350 companies’ ability to support their defined benefit pension obligations has shown little signs of improving in the short term.

The index, which tracks the overall level of support provided to DB schemes in the FTSE 350, now stands at 76 out of a possible score of 100. The index has remained relatively flat and has only improved by two points since December 2011.

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Furthermore, there are few signs the situation will recover to anywhere near the 88 level achieved pre-recession any time soon.

Jonathon Land, pensions credit advisory partner at PwC, said: “Pension schemes’ strategic decisions should be based on the level of risk their employer covenant can support, the contributions an employer can afford and sustainable investment in the long-term future of the company.”

Adviser View

Andrew Swallow, director of London-based Swallow Financial Planning, said: “Employers shackled with existing schemes are in many instances technically bust, and a bit like the national debt in that they continue to trade in the hope that the problem will eventually subside.

“At some stage, employers, trustees and their members will have to accept that promises made cannot be met, otherwise perfectly good businesses will become moribund as their pension fund liabilities prevent expansion research and/or takeover.”