Exploring Southern Europe – UK subsidiary companies with DB pension schemes
This survey relates to constituent companies of the Spanish IBEX and Italian FTSE MIB share indices that have UK subsidiary companies with defined benefit (DB) pension schemes.
The survey covers twelve Southern European companies with around £47.6 billion of UK pension liabilities between them.
Our report analyses the contributions paid, levels of deficit and levels of risk within the schemes. Data has been taken from the latest available financial statements of the UK subsidiary companies, which are as at 31 December 2016 in most cases. Although the companies are not named directly within this survey, they are represented by the same number in each chart throughout.
- Most schemes experienced a decrease in their funding level on the accounting basis between 2015 and 2016, with the average funding level as at 31 December 2016 being 89%
- The decrease in funding level between 2015 and 2016 was largely due to discount rates in 2016 being significantly lower than in 2015, which was caused by a significant fall in bond yields over the period
- Employer contributions to DB schemes represent a significant proportion of total staff costs, on average being 21.7% of the total. The contributions paid in respect of past service deficits are often greater than those paid for current service benefits
- Although UK subsidiaries produce on average only 15% of the global revenue, they account for on average 60% of the global DB liabilities and 64% of the global DB contributions paid
Benefit payments from UK DB schemes generally increased between 2015 and 2016, with the average increase being 27%. It is still too early to say what the longer term effect of the Freedom and Choice flexibilities will be, but it will be interesting to monitor the situation in future years.
I hope you will find our report both interesting and useful as a benchmark of your UK pension exposure against other Southern European-owned companies.
Contacts
Andrew Vaughan
Director, MBWL International
VIEW PROFILE
Email:
andrew.vaughan@barnett-waddingham.co.uk
Tel: +44 20 7776 2275
Andrew Vaughan
Director, MBWL International
Senior Partner, Barnett Waddingham
An industry leader with a prestigious career in defined benefit pensions.
Andrew advises a range of UK and international businesses on defined benefit pension issues including pension scheme funding, risk reduction exercises, pension benefit design, merger and acquisition (M&A) transactions and accounting disclosures.
Throughout Andrew’s illustrious, 35-year career, he has worked at board level with FTSE100 (or equivalent) organisations, becoming a trusted adviser to major multinationals. He has provided funding and related advice to clients across a range of scheme sizes and industries with pension scheme assets as high as £10 billion.
He has developed an innovative liability management strategy and has provided extensive corporate M&A advice and due diligence to international businesses investing in the UK.
An esteemed figure, he chaired both the Association of Consulting Actuaries and the International Association of Consulting Actuaries, as well as the Defined Ambition Industry Working Group.
Contacts
Andrew Vaughan
Director, MBWL International
VIEW PROFILE
Email:
andrew.vaughan@barnett-waddingham.co.uk
Tel: +44 20 7776 2275
Andrew Vaughan
Director, MBWL International
Senior Partner, Barnett Waddingham
An industry leader with a prestigious career in defined benefit pensions.
Andrew advises a range of UK and international businesses on defined benefit pension issues including pension scheme funding, risk reduction exercises, pension benefit design, merger and acquisition (M&A) transactions and accounting disclosures.
Throughout Andrew’s illustrious, 35-year career, he has worked at board level with FTSE100 (or equivalent) organisations, becoming a trusted adviser to major multinationals. He has provided funding and related advice to clients across a range of scheme sizes and industries with pension scheme assets as high as £10 billion.
He has developed an innovative liability management strategy and has provided extensive corporate M&A advice and due diligence to international businesses investing in the UK.
An esteemed figure, he chaired both the Association of Consulting Actuaries and the International Association of Consulting Actuaries, as well as the Defined Ambition Industry Working Group.