Diploma pension schemes see sharp deficit increase

Diploma has reported that two of its pension schemes have seen a sharp increase in their deficit levels.

In its preliminary results announcement for the year ending 30 September, the
global life science and industrial parts product supplier says that the aggregate accounting pension deficit for the group’s UK defined benefit scheme and Swiss Kubo defined contribution scheme rose by £7.3m to £17.8m.

The increase for the two schemes — which are accounted for in accordance with IAS19 — reflects the impact from a large reduction in bond yields in both the UK and Switzerland during the second half of the year.

According to the report, the gross aggregate pension liability for both schemes has increased by £8.2m to £57.3m, and is funded by £39.5m of assets.

Diploma’s last DB scheme formal triennial funding valuation was carried out as at 30 September 2016, and reported a funding deficit of £9.2m with a 75 per cent funding level, based on bond yields of 1.5 per cent at the valuation date.

Bond yields were 1.8 per cent at 30 September 2019.

The FTSE 250 company is currently funding the deficit with the objective of eliminating it within ten years.

It does this with cash contributions of £0.5m, which increase annually on 1 October by 2 per cent.

Diploma says that a charge of £0.1m has also been made against operating profits this year to equalise GMPs accrued between 1990 and 1997 between men and women.

Last September the scheme trustees completed a buy-in of the pensioner liabilities which represented some 30 per cent of the scheme's liabilities existing at 1 September 2018.

The scheme’s new formal funding valuation is being carried out as at 30 September 2019 and the results will be reported in next year's annual report and accounts.

In Switzerland, local law requires Kubo — which Diploma bought in 2015 — to provide a contribution-based pension for all employees, which are funded by employer and employee contributions.

This pension plan is managed for Kubo through a separate multi-employer plan of non-associated Swiss companies, which pools the funding risk between participating companies.

In Switzerland, Kubo's annual cash contribution to the pension scheme was £0.4m.

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