Note 3 - Impact on a company's share price of its final salary pension scheme

Published by Nick Griggs on

It is often suggested that investors do not understand defined benefit (DB) pension schemes and therefore do not properly allow for them when assessing the value and risks associated with a particular company.

In conjunction with the Centre for Global Finance at the University of the West of England we have undertaken some research to consider the impact various pension related events have historically had on a company's share price.

Our 3rd note in the series considers the impact that the recent Office for National Statistics (ONS) announcement on the calculation of Retail Prices Index (RPI) had on the share prices of three FTSE100 companies which use RPI to index their pension liabilities.

We also carried out a similar analysis relating to an earlier government announcement that it was changing the inflation index used to calculate the statutory minimum level of increase from RPI to Consumer Prices Index (CPI).

Full details of our findings are presented in the following note: