Almost two-thirds (62%) of listed companies in the UK with defined benefit pension schemes issued profit warnings in 2020, according to EY’s quarterly analysis of profit warnings.
Some one in ten issued three warnings within the space of a year, which suggests insolvency is in their future.
EY’s research revealed that 90% of profit warnings were related to the pandemic and 22 profit warnings were issued by listed DB scheme sponsors in the last quarter of 2020.
The five FTSE sectors with the highest number of warnings were: Travel and Leisure (30), Industrial Support Services (23), Construction and Materials (19), Retailers (18) and Household Goods and Home Construction (14).
Gareth Mee, UK actuarial leader at EY, said: “The market pressures of 2020 were no small feat to overcome, and given how 2021 has started, the outlook isn’t likely to improve in the short term.
“All businesses have been challenged by the pandemic, but those with defined benefit pension obligations sit disproportionately in the sectors which are struggling most. Corporates and trustees alike are working hard to maintain business as usual, while ensuring pension obligations to members are fulfilled.”
He added: “But with volatility persisting, and the pressures across many schemes’ investment portfolios increasing, the outlook is concerning, making the case for an urgent relook at pension scheme de-risking and strategic planning for an increasingly uncertain future.”