Capita Fiduciary Group research: Defined benefit pensions have significant financial impact

Defined benefit (DB) pension schemes have had a significant impact on UK organisations, according to research by Capita Fiduciary Group.

The finance director survey: The management and impact of defined benefit pension schemes found that 86% of organisations that continue to operate DB schemes have suffered from a, primarily financial, increased impact.

The research, conducted among 219 finance directors in July, also found that 63% of respondents have had to amend their business plan as a result of the cost of managing their closed DB pension scheme.

The research also highlighted concerns that finance directors have with their pension scheme. The main issues are legacy DB pensions (39%) and the adequacy of the defined contribution (DC) pension scheme (34%).

Almost three-quarters (73%) of finance directors with closed DB schemes said the scheme features as an item on the agenda at less than half of an organisation’s board meetings each year. Just 10% have this on the agenda at every board meeting.

Sue Lawrence, managing director at Capita Fiduciary Group, said: “Pension schemes have been hit by a multitude of issues in recent years including market volatility and increased longevity, and this in turn has meant that the organisation is suffering from an increased financial impact.

“The reality is that many organisations with legacy closed defined benefit schemes are having their strategic planning options strangled by the consequences of the pension scheme.

“In the current economic climate, DB schemes simply restrict growth opportunities for UK organisations even further.

“It is essential that finance directors and the pension board trustees work together to ensure all parties concerned have a solid understanding of the scheme and its impact on the business.

“By treating the pension scheme as a subsidiary of the business, it becomes an integral part of the business agenda and can be proactively managed in the same way as any other item on the organisation’s balance sheet.”

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