This survey looks at German companies, almost all of which are constituents of the DAX index, which have UK subsidiary companies with defined benefit (DB) pension schemes, covering 22 German companies with around £26.9bn 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 a 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.
The costs and risks associated with DB pension schemes are well known within the industry. In most cases the parent companies in our survey 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 23% of total staff costs, versus a corresponding figure of around 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 German-owned companies.
I hope you will find our report both interesting and useful as a benchmark of your UK pension exposure against other German-owned companies.