FTSE 100 giants warned over paying dividends with pensions shortfalls

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Britain’s biggest companies have been warned they might have to put dividends ‘on hold’ to cover shortfalls in defined benefit pensions schemes.

Firms have been allowed to defer deficit payments into some schemes due to the impact of Covid-19, but with many now resuming dividends the regulator has said the burden cannot just fall on pension members.

David Fairs, executive director of regulatory policy with the Pensions Regulator, said retirement schemes should “not be the only creditor feeling the pain.”

About half of FTSE 100 companies have pension deficits with BT Group PLC (LON:BT.A), Shell, BAE, GlaxoSmithKline and AstraZeneca among those with shortfalls in the billions for which they are liable.

“Trustees should consider very carefully any [further] request to lower contributions,” said Fairs, speaking at the Pensions Expert industry webinar on DB funding, held this week, and reported by the FT.

“We expect any request to be short term and we want to see higher contributions in subsequent years.”

“The Pensions Regulator’s call for companies to avoid dividend payments if they are still recovering from Covid-19 and have pension obligations could affect the boardroom’s willingness to sanction dividend payments, for fear of public or regulatory backlash,” said Russ Mould, investment director at AJ Bell.

Shares in BT eased 2% to 190p.


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