Pension deficits back in the headlines

Uniq, the food supplier for companies such as Marks & Spencer, is today under the spotlight after the UK Pension Regulator rejected proposals to cut the company's £436 million pension fund deficit. This was a major blow to the company after proposing an innovative way of raising money to reduce the short-term pressure on the company's cash flow and pension from liability.

As the financial situation in the UK continues to tighten we are seeing more and more companies struggling to meet their pension fund liabilities. Uniq is not the first, and it will not be the last, company to be impacted by its pension fund liability at a time when the company itself appears to be "doing well". There is some debate as to whether the current pension liability formula is too conservative and is placing too much pressure upon companies in the short term, even though in the longer term there may well be able to cover their pension fund liabilities.

The ever-growing pension fund deficit in the UK business arena is now reaching levels which are starting to impact upon the underlying companies and their trading positions. Whether the UK government can relieve this pressure in the short term, by potentially reinstating tax relief taken away under the previous Labour government, is something which David Cameron and his colleagues will need to ponder.