The FTSE-100 companies with pension deficits paid out £53billion in dividends last year, some £11bn more than their combined pension deficits of £42bn.
The 56 companies which declared scheme deficits at their 2015 year-end paid out 25 per cent more in dividends than their aggregate deficits.
The annual Accounting for Pensions report from actuaries Lane Clark & Peacock (LCP) found that FTSE 100 companies pay around five times as much in dividends as they do in contributions to their defined benefit pension schemes.
They are also putting more than twice as much into DB pensions as into defined contribution pensions - £13.3bn against £6bn – and this gap has been growing.
Bob Scott, LCP’s senior partner, said: “The collapse of BHS and the potential sale of Tata Steel UK.....have highlighted the significance of pension liabilities and the impact that a large defined benefit scheme can have on a UK company. Companies with large deficits may see pressure from the Pensions Regulator on their dividend policy in light of the Select Committee’s report into BHS.”
Mr Scott said one way to cut deficits was to adjust the inflation linking required by law, an idea which figured prominently in the government consultation into the British Steel crisis.
“The government should end the uncertainty – the legal lottery – by allowing companies to move from RPI to CPI, subject to safeguards,” he said.
“The safeguards are important as they should not automatically allow a profitable company with a large pension surplus to increase that surplus by reducing benefits. They could, however, provide relief to a company with a large deficit where the trustees agreed it was in the members’ interests for benefits to be reduced.”
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