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Blue-chip firms concerned over paying pensions

One in five finance directors of the UK&#39s biggest companies are worried about making future pension payments to retired staff, according to research from Prudential UK.

The data reveals that 30 per cent of finance directors are concerned about the need to make cash injections into pension funds, while 20 per cent are worried about the increased mortality risk associated with their schemes.

Although 65 per cent of finance directors believe the financial strength of their pension funds will improve over the next 12 months, the Pru says the complexity of defined-benefit schemes means companies should consider ways of managing risk.

The company says scheme risk can be managed through bulk annuities and parking funds by matching them with assets that more closely reflect the true cost of the scheme&#39s liabilities, a service it offers in conjunction with bond specialist M&G.

It also says company pension transfer plans, where trustees and employers agree to wind up the scheme and the trustees liabilities are discharged, can be more cost effective than keeping schemes open.

Pru UK director of risk management of pensions schemes Ted Clack says: “One of the biggest challenges facing many companies today is how to address their pension fund deficits, which for FTSE 350 companies collectively runs into billions of pounds.

“Our Risk Management solution is flexible enough to offer a suite of products which help manage risk and deliver bespoke solutions across the whole spectrum of schemes.”

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