Smiths Group, the maker of airport security scanners and bomb detectors, has sealed a deal to lower its troublesome pension liabilities.
The FTSE 100 engineer said it had reached an agreement with its two major retirement funds — the Smiths Industries Pension Scheme (SIPS), which has a deficit of £535m, and the TI Group Pension Scheme (TIGPS), which has a £117m black hole. The company will pump £36m a year into the SIPS for the next six years and invest in gilts on behalf of it. The TIGPS will receive £16m a year until April 2016.
Smiths closed the lucrative final-salary schemes to new and existing members in 2009.
The company said its pension liabilities had grown because of the Government’s money-printing programme, which has been heavily criticised by pensions experts.
Quantitative easing hurts all final-salary schemes because the Bank of England uses the money to buy debt, which pushes up the price of government gilts. This creates lower returns, or yields, on pension funds’ investments. It also affects the way in which pension liabilities are calculated, using a formula known as the discount rate.
Smiths shares fell 2p to 1,357p. It has enjoyed a good run on reports that it is about to sell its medical division, which could net £2bn.