Barclays Group’s pension deficits should act as a wake-up call
News that the deficit in the Barclay Group’s company pension schemes has increased by a staggering 550 per cent during 2012, further strengthens the case that some of Britain’s largest firms might need to consider a higher risk investment strategy to plug their ‘pension black holes’ and to avoid plundering their scant profits.
The banking giant’s posting of this alarmingly high sum supports the argument that firms which are struggling to fulfil their pension commitments –largely due to the impact of the weak economic climate – should reduce their holdings of assets which are perceived as ‘safe’, such as government bonds, as they are currently offering rock-bottom returns, and increase their exposure to well-diversified, higher-risk investments that could potentially provide better returns.
Failure to adopt this approach could mean that they will need to plough in cash from their profits, which could, ultimately, see some smaller or more vulnerable firms collapse, and this in turn would hamper the country’s economic growth.
The deficit across all the Barclay Group’s schemes is now, according to reports, £1.3bn. The bank said this reflected net recognised assets of £2.1bn and unrecognised actuarial losses of £3.4bn.
Last year, Pricewaterhouse Coopers published findings from a survey which concluded that, on average, companies need a further three years to plug their growing deficits, advancing the average repayment time to 11 years. The report added that more than 90 per cent of schemes had a deficit and over 50 per cent said their deficits were increasing.