Pension insurance deals boost UK company shares by up to 3%, says report By Reuters


© Reuters.

LONDON (Reuters) – Most London-listed companies that transferred pension obligations to insurance companies saw their share prices rise by up to 3% more than sector peers in the six months after completing the deals, a report showed on Wednesday.

Two-thirds of the more than 70 firms which transferred part or all of their defined benefit pension schemes to an insurer since 2007 saw a share price lift afterwards, the report by consultants Mercer said.

Pension payments in a defined benefit scheme are based on an employee’s final salary before retirement.

The share price rise ranged from 0.25-3% and tended to increase over the six-month period, the report showed.

“Defined benefit plans in some cases can be a drag on a company, to remove some of those elements is probably a positive,” said David Ellis, UK head of bulk pensions insurance at Mercer.

The deals surveyed by Mercer totalled 90 billion pounds ($114 billion) and 48 were for companies in the FTSE 100 () index.

Two-thirds of Britain’s company pension schemes are in deficit, following years of low interest rates which have slashed their investment income.

So-called bulk annuity deals enable companies to rid their balance sheets of the pension funds, which can be a deterrent to merger activity, but many companies cannot afford them.

Bulk annuity deals hit a record volume of 44 billion pounds last year, though 2020 is expected to be slower.

Legal & General (L:), one of the biggest players in the market, said on Tuesday it expected to have completed 3.4 billion pounds in deals by the end of June and was quoting on a pipeline totalling a further 25 billion pounds.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





Original source link