In response to the Pensions Regulator's announcement that trustees should not permit companies to reduce pension scheme contributions unless they also declare nil dividends, Marcus Hurd, Head of Corporate Solutions, Aon Consulting said:
ìUnfortunately, the Pensions Regulator's guidance offers little help for the majority of UK businesses, who are struggling to keep their heads above water.
At a time when many companies are desperate for cash, making alternative pension arrangements is one way to alleviate the strain. Pension schemes are long term investments and companies are strapped for short term cash, so it makes sense for companies to consider pensions schemes in order to free up liquidity. Pension schemes are in a relatively unique position to be able to provide companies with a cash management solution as they absorb significant levels of company cash on a regular basis.
ìScrapping dividends is not a serious option for most companies. Any company declaring a zero dividend would run the risk of losing market confidence. This could send the wrong impression to the market and cause even more trouble. The key priority for the UK has to be to restore confidence in the financial system - not destroy it further.
ìWe recognise that the Regulator's mandate is to safeguard corporate pension schemes but businesses are operating in a time of unprecedented difficulty. The overall priority, therefore, has to be finding ways to help companies free up liquidity. The Regulator's guidance does not help achieve this goal.î
Pensions Regulator puts pensions before company dividends
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