Cluttons surveys pension pot to deal with deficit
The world’s oldest practicing firm of chartered surveyors, Cluttons, is locked in talks with the trustees of the firm’s final salary pension scheme over how to deal with its deficit.
The company’s liability stood at £42.9m at the end of March and since then it has risen due to the EU referendum result, the subsequent lowering of interest rates and the expectation they will stay lower for longer.
The scale of the pensions shortfall that Cluttons needs to make up has escalated over the past two years due to low gilt yields and interest rates, combined with an increasing life expectancy of the scheme’s pensioners. This resulted in a £19m leap during the year to 31 March 2015.
[caption id="attachment_862949" align="alignright" width="570"] Steven Morgan (left) and James Gray: “Liability can be worked out over the long term”[/caption]
The world’s oldest practicing firm of chartered surveyors, Cluttons, is locked in talks with the trustees of the firm’s final salary pension scheme over how to deal with its deficit.
The company’s liability stood at £42.9m at the end of March and since then it has risen due to the EU referendum result, the subsequent lowering of interest rates and the expectation they will stay lower for longer.
The scale of the pensions shortfall that Cluttons needs to make up has escalated over the past two years due to low gilt yields and interest rates, combined with an increasing life expectancy of the scheme’s pensioners. This resulted in a £19m leap during the year to 31 March 2015.
Cluttons’ pension issue is shared by some of the UK’s biggest companies with BT, Tesco and British Airways also dealing with substantial deficits and research by PwC shows UK companies face a £710bn black hole.
A negotiated settlement over Cluttons’ pension scheme is being considered but “the size of the deficit remains hugely significant in terms of the group and LLP balance sheets” according to the company’s annual results for the year to 31 March 2016.
Discussions also include the Pension Protection Fund, the Pensions Regulator and Cluttons’ adviser, Deloitte.
Cluttons brought in Deloitte last October and held discussions with Lambert Smith Hampton owner, Countrywide, about a sale of the business but issues around the pension scheme proved insurmountable.
The scheme itself closed in 2006 but liabilities are expected to continue into the 2030s.
A recovery plan for the scheme was put in place in 2013 between the company and the trustees. Once every three years a full revaluation takes place, the last of which was in August last year, but this has yet to be finalised. Nor has a subsequent, fresh recovery plan to determine the level of deficit repair contributions that have to be made by the company.
Currently the firm pays monthly contributions plus a “ghost partner” share of profits into the scheme.
The scale of the problem was such that in Cluttons’ results for the year to 31 March 2015 its auditor flagged “material uncertainty which may cast significant doubt about the group’s and LLP’s ability to continue as a going concern”.
However, in its latest set of accounts this status has been lifted as liabilities saw a modest decrease of £1m.
Operationally, the 600-strong company is performing well and reported a £7.1m operating profit in its latest results.
Managing partner James Gray said the liability could
be worked out over the long term.
“In as far as our conversations with the regulators and the Pension Protection Fund, we are working very hard and engaging the best advisers we can to deal with it in the most appropriate way for the pensioners and the business and our clients,” he said.
Read an interview with senior partner Steve Morgan and managing partner James Gray here
