European companies with UK defined benefit schemes

Published by Andrew Vaughan on

This report relates to constituent companies of the Dutch AEX, French CAC40, German DAX, Spanish IBEX, Italian FTSE MIB and Scandinavian OMX share indices that have UK subsidiary companies with defined benefit(DB) pension schemes. The survey covers 79 European companies with around £107bn 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 2014 in most cases. Although the companies are not named directly within this survey, they are represented by the same number in each chart throughout.

"In most cases the parent companies in our report are leading players in their industries and are able to absorb reasonably substantial pension costs."

The costs and risks associated with DB pension schemes are well known within the industry. In most cases the parent companies in our report are leading players in their industries and are able to absorb reasonably substantial pension costs. However, the impact upon performance and return on investments of the UK subsidiary companies can be more pronounced. Comparisons of these subsidiaries against other UK companies without legacy DB pension liabilities, especially on a cash basis, could be heavily influenced by the pension related costs and cash contributions.

There are also some surprising results, for example that although the average funding level of these schemes is slightly higher than the FTSE350 average, the total contributions paid last year (for past service deficit and current service) represented 14.1% of total staff costs, versus a corresponding figure of just 6% for the FTSE350.

I hope you will find our report both interesting and useful as a benchmark of your UK pension exposure against other European-owned companies.