Employers increase special pension contributions

The number of FTSE 350 companies making special contributions to pension schemes has risen for the third year running as employers strive to address pension risk, according research released by Mercer and the Association of Corporate Treasurers.

Out of the 89 corporate treasurers that were interviewed for The Survey of Pension Financial Risk, two-thirds of made special contributions  over and above normal contributions, to their UK or overseas schemes in 2008, up from 58% last year.

The move may have been driven by factors such as general pressure from trustees (19%), general risk mitigation (27%) and strengthened mortality assumptions (16%). Dave Robertson, worldwide partner in Mercer’s financial strategy group, said: “This suggests that some sponsors believe discretionary risk mitigation and improved funding levels add value to the firm.”

The report also showed that 37% of schemes had strengthened their mortality assumptions. However, these revised levels fell short of the benchmark which the Pension Regulator recently focused on. Just over half the respondents felt there had been a change in perception of the sponsor’s credit risk as a result of the upheaval in the marketplace. However, more than a third thought that there had not been a change in perception.