FDs not doing enough to alleviate deficit burden

Head of Grant Thornton’s Pensions Advisory division and Recovery & Reorganisation, Darren Mason, said FDs were insufficiently educated about the tools and options open to de-risk a pension scheme.

“There are a lot of instances of companies going insolvent, and pension scheme deficits are the major contributing factor,” said Mason.

He pointed out that large deficits can make companies unsaleable, as well as making them very difficult to refinance.

Mason said: “Companies with large deficits are going to struggle to attract the best, talented, top management. They could be running a company for 20 years for the pension scheme, and top directors want share options, equity, in addition to salary. It’s a big problem.”

Though FDs were uniquely placed to combat the growing problem, Mason continued, they generally weren’t taking enough action.

“In your typical DB scheme, FDs are the ones who intimately understand their business and its cycles, and understand the periods where they might be able to apply additional resource for de-risking,” he argued.

“We’re trying to educate FDs through our FD Intelligence campaign. It’s very important that FDs are made aware of these problems before they get too big for them.”

He added: “I think FDs could have a huge effect on this. They control the purse strings, and it’s about them - jointly with the trustees - buying into a strategy as to how they’re going to tackle a pension deficit over the next twenty years.