There has been a dramatic recovery in UK dividends over the second quarter of this year, with payment up 51.2 per cent according to figures from Link Group.
This comes after a contraction in dividend payments following the onset of the coronavirus pandemic. Pensions experts have said this recovery should lead to improved funding of many DB schemes after The Pensions Regulator signalled it would be looking at these two factors in parallel to ensure firms treat all stakeholders fairly.
Barnett Waddingham partner Simon Taylor says this improvement in dividend payouts has come with a recovery in UK DB scheme funding. He says: “It’s clear from the dividend rebound that a sense of normality is returning for UK corporates.
“Fortunately, the same could be said for the funding level of UK DB schemes. Barring any further shocks to financial markets, many schemes will find themselves in a stronger position than they were prior to the pandemic. Indeed, our recent analysis of the FTSE350 DB schemes showed that the average time to buyout for these schemes is now ahead of pre-pandemic expectations.
“As the rebuilding continues over the coming months, companies will face competing demands from a variety of stakeholders, and striking the right balance will be challenging.
“For companies with a DB pension scheme, revisiting the journey plan should be high on the list of priorities. Given the dramatic resurgence in DB scheme funding levels, the time to endgame may now be closer than expected, and companies should ensure that they are appropriately prepared for the final stages of the journey.
“As well as a fresh look at the scheme’s funding and investment strategy, companies should be aware of the actions that could be taken to accelerate the time to endgame, such as member option exercises. Having a clear decision-making framework will allow companies to capitalise on any further opportunities that might arise, and allocate capital in the most appropriate manner.”
