Putting pensions into context
Scottish Pensions Index
05 Jun 2018 - Estimated reading time: 10 minutes
The 2017/18 financial year has seen pension schemes and the employers that sponsor them come under the spotlight once again. High profile cases such as that of BHS and Carillion have ensured that the topic of pensions has never been far from the front pages of newspapers and the minds of the general public.
This paper explores the key issues faced by pension schemes in Scotland and their sponsoring employers. We have analysed the 31 Scottish-based Plcs and leading private companies and placed their pension scheme obligations in the context of the businesses that support them.
Three key themes were identified from our research:
- Exposure; greater deficits and greater risk taking: Whilst many may have sighed with relief at the improvement in affordability and aggregate deficit of Scotland’s pension schemes over the latter stages of 2017, the volatility experienced in the first quarter of 2018 is a stark reminder that Scottish schemes are on average 4 times more exposed (in days of earnings terms) to the highs and lows of the equity markets than their FTSE 350 counterparts.
- Contributions vs dividends: FTSE 350 companies predominantly expend more days of earnings on dividends than pension contributions whilst the reverse is true for the average Scottish company.
- While most Scottish companies are well placed, 7 of the 31 companies we analysed have exposures similar in relative scale to those faced by Carillion. With careful management Scottish pension schemes remain largely affordable, however, the burden of pensions is significant for a number of Scottish companies.
Download our paper to find out more about our analysis, the issues faced by employers and the opportunities to help you reduce pension risk.