Plan Sponsors Urged to Form Clear Derisking Strategy
13 August 2012 (PLANSPONSOREurope.com) – As Dawson International heads towards administration plan sponsors have been urged to form a clear de-risking pension strategy by Malcolm McLean, a consultant at Barnett Waddingham.
Last week the cashmere manufacturer announced it was considering calling in the administrators and delisting its shares.
McLean says: “Dawson is not the first and probably won’t be the last company to come adrift as a direct result of its pension legacy.
“Reducing the size of the company’s operations and its attendant workforce doesn’t cancel out all the pension liabilities that have built up over the preceding years. In fact those liabilities are likely to grow as more and more former workers with preserved rights within the scheme reach retirement age and claim their pensions whilst improving longevity rates mean they and existing pensioners increasingly live longer lives.
“The financial significance of a final salary scheme means employers need to be more proactive in managing their pension scheme liabilities. They should establish a clear strategy to de-risk the scheme over time. The Dawson International case has shown how deficits can quickly grow out of control particularly where the sponsoring employer is shrinking. Some of the more sophisticated de-risking techniques, that have previously only been available to the largest employers, should be considered, in a proportionate way, by all employers.”