CBI warns against overreacting to pensions debts

Posted on Jan 19, 2009

The CBI has warned that extra pressure on firms who run defined benefit pension schemes could weaken sound businesses and hinder the UK's economic recovery.

According to the CBI, pension deficits are playing on investors' minds who, rather than take a longer term view on pension scheme liabilities, will mark firms down.

This could spark a vicious circle whereby trustees ask for additional funding from firms trying to weather the recession, thereby cutting business investment and performance and forcing shares even lower.

The CBI is calling for:
* investors to take a longer term approach;
* trustees to agree to longer recovery plans;
* the Pensions Regulator to approve longer recovery plans;
* the PPF to resist increasing contributions to the fund;
* the Government to reform rules which hinder firms with defined benefit schemes from adapting to recession - such as the Section 75 rules.