This is our first annual survey of US companies which have a UK subsidiary with a defined benefit (DB) pension scheme.
The survey covers 32 of some of the most influential companies in the US, with around £56 billion of UK DB pension liabilities between them.
Our survey considers funding levels and actuarial assumptions on the company accounting basis, investment strategy, company contributions paid and liability management, as well as looking at the impact of the UK on the global company.
average DB company contributions as a proportion of staff costs
average UK DB liabilities as a proportion of global DB liabilities
average UK DB company contributions as a proportion of global DB company contributions
average increase in benefits paid
Our survey reveals that UK DB pensions may be making a disproportionally large impact on the performance of the US parent company. Indeed, although UK companies produce on average only 4% of the global revenue, they account for 29% of the global pension scheme liabilities and 31% of the global pension scheme contributions.
With pension scheme deficits having the potential to significantly impact a company’s accounts, we consider ways in which companies may improve their pension scheme funding level. This could be through improvements in investment decision making, optimising the actuarial assumptions used for accounting purposes, managing company contribution requirements or undertaking liability management exercises.
We also look at some of the similarities and differences between the pensions regimes in the UK and the US. For example, scheme funding assumptions and deficit contributions in the UK are subject to negotiation between the company and the trustees of the scheme, whereas in the US these are prescribed by legislation.