FTSE 100 companies that made a loss in 2015 paid out 25 per cent more in dividends than into their pension scheme, research suggests.
Actuarial firm Lane Clark & Peacock says the combined pension deficit of the 56 companies at the end of 2015 was £42.3bn but they collectively paid dividends of £53bn.
LCP says the well-publicised issues with defined benefit pension scheme deficits – for example Tata Steel and BHS – may lead to pressure from The Pensions Regulator on dividend policies.
LCP says if companies could change the increases in their pension scheme to match the consumer price index then FTSE 100 pension liabilities would drop by around £30bn.
If companies only provided the minimum level of pension increase set out in the legislation then liabilities would decrease by up to £100bn.
LCP senior partner Bob Scott says: “The Government should end the uncertainty – the legal lottery – by allowing companies to move from RPI to CPI, subject to safeguards.
“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.”
The research also finds that FTSE 100 companies are putting more than twice as much money into DB schemes as they are into defined contribution schemes – £13.3bn compared to £6bn.
Following the recent Bank of England base rate cut and the extension of the quantitative easing programme, pension scheme deficits have increased. By 9 August, LCP estimates FTSE 100 companies had pension deficits totalling £63bn, up from £46bn at the end of July.
The report found the average FTSE 100 company’s pension liability was 34 per cent of its market capitalisation and its pension scheme deficit was 4 per cent of its market capitalisation.