Companies need to tell us the real numbers when it comes to pension deficits, say experts

Some of Britain's high profile corporate failures could have been avoided if details of their pension scheme deficits had been made clearer according to experts.

In a wide-ranging review of the FTSE 350, covenant experts, Lincoln Pensions, called for a greater level of transparency in company’s annual reports.

"We believe that many of the issues associated with recent high profile cases, such as BHS and Tata Steel, could have been highlighted much earlier through greater transparency in the accounts," said Darren Redmayne, the chief exec of Lincoln Pensions.

Speaking to Morning Wire, Redmayne said that there was a "much better chance" that the likes of BHS could have been saved if people had known about its pension situation through clearer disclosures.

Currently, companies must calculate their pension surplus or deficit according to specific accounting rules. But these calculations often don't reveal the actual cash cost companies pay each year to plug deficits.

The research revealed that two-thirds (67 per cent) of companies within the FTSE 350 do not disclose the deficit or surplus position of their defined benefit schemes as calculated through company funding contributions – the actual amount that they need to pay rather than the accounting number.

The news came as PwC reported that aggregate pension deficits across UK companies had declined during October by 10 per cent, falling some £60bn. Now was the time to act, said the head of pensions Raj Mody:

Companies and trustees should first look at pensioner liabilities and consider taking these off their balance sheet.

Otherwise they are gradually turning into an annuity provider, which would seem odd, unless that is their business. Instead, they could take steps to avoid their pre-retirement liabilities turning into post-retirement liabilities.