Almost 10 per cent of FTSE 250 companies would need a payment of more than two years’ dividends to settle their defined benefit pension deficits, JLT Employee Benefits has found.

According to JLT, 23 FTSE 250 companies would need a total of £4.7bn collectively to settle their DB deficits in full. Twelve companies require a payment of up to two years’ dividends to settle their deficits completely and 56 companies could settle their deficits with a payment of up to one year’s dividend.

In addition, 20 FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. The Go-Ahead Group total disclosed pension liabilities are more than four times their equity market value.

JLT Employee Benefits director Charles Cowling, comments: “While these metrics don’t capture the entire picture, they are a useful indicator of the pension drag on the sponsoring company.

“Shareholders are increasingly aware of the potential disruption that a massive pension scheme can cause to a business and it should be expected that it will weigh the share price down.

“While 9 per cent may not seem a lot, the situation in the FTSE 250 is much more serious than in the FTSE 100 which has only a couple of companies with such a pension burden.”

“To deal with this, companies should firstly take every opportunity to stop these deficits and liabilities getting larger, and secondarily they should put a plan in place in reduce the size of their pension scheme.”

The total deficit in FTSE 250 pension schemes is estimated to be £11bn as at 30 June 2016. Only 41 companies disclosed a pension surplus in their most recent annual report and accounts while 91 firms disclosed pension deficits.

In the last year, total disclosed pension liabilities of the FTSE 250 companies were an approximate £81bn, with 26 companies disclosing liabilities of more than £1bn. The largest was reported by FirstGroup, which disclosed liabilities of £4.05bn. A total of 156 companies disclosed liabilities of less than £100m, and from these, 118 companies have no DB pension liabilities.

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