European head-quartered companies are paying over two times more per employee into their UK pension schemes than their FTSE 350 counterparts, Barnett Waddingham has found.

In its annual research into European companies with UK defined benefit pension schemes, Barnett Waddingham noted that they are paying over two times more per employee per year towards deficits at £5,700 compared to £2,400 per employee per year for the FTSE 350.

It was predicted that if these European firms continued to pay deficit contributions at the same rate, the average company would be likely to clear their accounting deficit in about six years, almost a year ahead of the FTSE 350.

Research also found that 40 per cent of European companies surveyed have a surplus in comparison to 29 per cent of FTSE 350 companies.

In addition, the cost of final salary schemes as a proportion of total staff costs were higher for European companies at 14.9 per cent while FTSE 350 stood at six per cent.

Furthermore, looking at UK pension contributions in comparison to the global outlook, Barnett Waddingham noted that contributions per employee are over three times higher in the UK compared to the global picture, £9.500 compared with £3,000. UK subsidiaries, however, only account for six per cent of global revenue and 30 per cent of global DB pension obligations.

Barnett Waddingham partner Andrew Vaughan commented: “These figures raise an interesting question as to why are European companies with UK final salary pensions paying proportionately more than their UK counterparts to fund deficits? One possible explanation is that European head-quartered companies have tended to adopt a more cautious approach globally to managing their pension obligations. It will be interesting to see how this pans out post Brexit.

“Given the outsized impact of UK DB pension obligations on their balance sheet, many of the constituents in our research are clearly comfortable funding UK pensions at a quicker rate as it allows them to de-risk at a faster pace and means they should be free from the deficit burden sooner.”

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