PensionsOct 20 2016

Rathbones issues shares to ease £58m DB deficit 

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Rathbones issues shares to ease £58m DB deficit 

Rathbones saw its funds under management climb in the third quarter, as the group decided to issue shares to mitigate its defined benefit scheme deficit.

According to a quarterly update published today (20 October) for the three months ending 30 September, the Rathbone Brothers group saw funds under management jump 8.5 per cent, hitting £33.2bn.

The company was bolstered by its unit trust business which posted net inflows of £170m from the £99m inflows reported at the same time last year, despite the what the firm called a challenging industry backdrop for inflows as a whole.

Philip Howell, chief executive of Rathbone Brothers, said this growth reflected the more favourable investment markets and continued business growth.

He also said the firm’s trading outlook for the full year is “consistent with market expectations”.   

The group also completed a review of its defined benefit schemes in response to rising costs associated with pensions, and has started engaging with pension trustees and employees about plans to close the two schemes. 

On 30 September, the pension deficit of the two schemes stood at £58.3m, an increase of more than 82 per cent from the £32m deficit posted on 30 June.

This is a marked increase from the £4.5m posted at the end of last year.

Recent research found the total deficit for all UK private pension schemes had swollen to as much as £500bn, reaching “dizzying heights” in just three months.

Rathbones announced its plan to raise approximately £38m via a share placing with institutional investors in a bid to mitigate its own situation. 

This placing will primarily fund the expected near-term higher capital requirement and also provide a measure of additional financial flexibility.

“The board considers the proposed actions, including the placing, to be appropriate to address the current situation and reduce future risks," the statement read.

“Nonetheless it is possible that further actions will be required in the future as the company will remain exposed to ongoing uncertainties related to the deficit position of the DB schemes.”