Many corporate treasurers and financial directors understate the true economic risk that their defined benefit (DB) pension schemes are exposed to. Writing for gtnews Hugo James, CEO of PensionsFirst Capital, suggests that taking such a rose-tinted view of the world makes de-risking opportunities look expensive, increasing pension risk and hampering their journey towards a buyout. In the meantime companies continue to pour money into their schemes in an attempt to plug funding holes. Indeed, over the past decade FTSE-350 companies have paid an estimated £175bn in mandatory deficit contributions, amounting to nigh on 40% of the average scheme asset value over the period. Yet attempts to plug pension black holes have effectively been in vain – company pension deficits have improved only slightly, if at all, over this period.
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