Thursday 16 June 2016 9:21 am

FTSE 100 firms pay billions to shareholders as pension deficits balloon

Fresh research has shown that 35 of Britain’s biggest companies paid out more in dividends than their ballooning pension deficits.

And 54 FTSE 100 firms paid out a total of $48bn to their shareholders annually for the past two years, almost equal to their combined pension scheme deficit of $52bn.

Collapsing interest rates and record low bond yields have hit pension fund income, helping to compound swelling deficits — the gap between assets and liabilities.

Large firms' pensions deficits have been drawn into focus recently by BHS and Tata Steel. The collapsed retailer's former owner, Sir Philip Green, yesterday vowed to resolve the pensions "mess", while the £485m pensions blackhole of Tata’s UK business is putting off potential buyers.

Russ Mould, investment director at AJ Bell, said: "Management teams face difficult decisions around how to allocate capital to ensure profitable growth and sustainable shareholder payouts."

He continued: "Emerging holes in their pension schemes add another difficult dimension but it is one that they cannot ignore."

"Dividend cuts and under investment in the business are perhaps more obvious actions senior executives want to avoid."

"However, insufficient contributions to the pension fund could leave the company with hefty liabilities which could drag on future performance and ultimately lead to staff receiving lower pensions if the business runs into difficulties and enters administration."