Britain's largest business organisation today launches a new campaign to protect companies struggling to make good unprecedented shortfalls in the funding of their finalsalary pension schemes.
The Confederation of British Industry (CBI) is calling for companies with deficits in their pension funds to be given longer to remedy the problem, so that they can concentrate for now on getting through the recession with as few job losses as possible. The campaign follows mounting concern about the damage that the stock-market collapse of the past two years has done to their pension funds – and the vast sums some companies are now being forced to pump into schemes in order to make good funding shortfalls.
Themost notable example is British Telecom, which last week said it would be increasing its pension contribution by hundreds of millions of pounds every year in order to make good a deficit which may total as much as £8bn. These additional pension contributions are likely to act as a serious drag on investment at the telecoms giant over the coming years.
“Firms who are fighting to preserve final-salary pensions find themselves punished by regulation, and much worse off than firms who offer no pension at all,” said John Cridland, the deputy director of the CBI. “We cannot allow sound businesses to be dragged down by these pensions, particularly during a recession.” Under regulations introduced in recent years – following cases where companies went bust and left big holes in their pension schemes – the Pensions Regulator takes an aggressive attitude towards finalsalary plans which develop funding deficits, setting strict deadlines towards which they must work.
However, the CBI believes that such companies are being forced to correct deficits much more quickly than is really necessary.