More than a fifth (21 per cent) of FTSE 350 companies with a DB pension scheme do not disclose their funding deficit or surplus position, according to new research from Lincoln Pensions.
The report, Give us a Clue 2, found that this figure had declined significantly since 2016 (67 per cent), when the first study was conducted, primarily due to calls for greater disclosure to allow investors and other stakeholders to fully appreciate the funding position of DB schemes within their portfolios.
There was also an improvement in the amount of companies with a DB scheme revealing the length of their recovery plan, which rose from 46 per cent in 2016 to 74 per cent.
Furthermore, the amount of FTSE 350 companies with DB schemes that disclose the amount of deficit repair contributions they are committed to paying into their schemes increased from 48 per cent to 81 per cent.
Despite these improvements, none of the companies disclosed a value at risk estimate, which takes into account the DB scheme’s investment strategy and how it mitigates the risks within the scheme’s liabilities. This would provide stakeholders with insights into the level of investment risk.
Additionally, only five FTSE 350 companies revealed their DB scheme’s funding position on any alternative valuation basis.
Lincoln Pensions managing director, Richard Farr, commented: “Whilst there have been significant improvements made in basic disclosures over the past 18 months, we believe that a continued push is absolutely necessary. As anyone experienced in financial refinancing and restructuring will tell you, denial is the biggest obstacle to an effective and efficient solution for all stakeholders.”
Lincoln Pensions’ report found that FTSE 350 companies with DB schemes are falling short of providing clarity around scheme funding requirements and risk and are calling for further disclosures.
They are calling for companies to reveal the technical provisions funding position and details of the associated recovery plans, a standard basis for disclosure of pension scheme volatility and more prudent and compatible funding targets.
Farr concluded: “Full disclosure of significant pension risks is essential. Without full disclosure, how can financial statements ever be true and fair?”
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