Pensions v. dividends

[Young Master Smeet]

From Today's Times:

Quote:

A listed plastics manufacturer has scrapped its dividend after its spiralling pension deficit triggered rules that prohibited a payout, in what could be a watershed moment for British business.

…

Under UK law, companies are not allowed to pay dividends if they have no distributable reserves, even if they have the cash. Accounting rules state that pension deficits, a non-cash item, count against those reserves.

This is partly attributed to the fall in tnerest rates, but, unless I'm mistaken, pension funds also get their revenue from equities, so failure to pay dividends will start to cut pension fund income, and further drive up deficits: we're looking at a possible death spiral, one that the emplotyers are going to start to try and pull out of by renegotiating the pension deal, and leaving workers worse off: just as recently happened with BHS.

Quote:

Carclo's predicament further highlights the corporate pension crisis. The combined deficit of all the UK's 6,000 pension funds has risen by £100 billion to £710 billion in the past month, according to PwC's Skyval Index.

and:

Quote:

Deficits have risen since the Brexit vote because investors have piled into safe assets such as government and high-quality corporate debt.

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