Pennon DB schemes swing to £51.8m deficit

Pennon Group’s defined benefit (DB) pension deficit relating to the continuing group stood at £51.8m at 30 September, down from a surplus of £6.6m at 31 March, according to the company’s half-year report.

The FTSE 100-listed group had originally reported an aggregate deficit of £8.5m at 31 March in its previous full-year results, though this included a £15.1m deficit which related to the now-sold Viridor business.

The water and waste company largely attributed this to adverse movements in financial assumptions, notably corporate bond yields, increasing the liabilities by £128m, though this was slightly offset by asset outperformance of £57m largely from liability hedged investments.

Additionally, the company saw a £21.4m increase in net pension liabilities relating to the transfer and settlement of certain pension obligations in connection with Viridor, a recycling business that the company sold during the period, as well as the impact of closing the principal remaining DB scheme to future accrual.

Pennon used some of the proceeds from the £4.3bn sale of its Viridor business to pay a £36m contribution to its principal scheme.

The period saw the group complete an employee consultation on plans to modernise its ongoing pension arrangements, with this leading to the decision to close its principal DB scheme to future accrual from 1 July 2021, with the group’s main schemes having been closed to new entrants since 1 April 2008.

All employees will transition to a new defined contribution scheme that will be offered through a master trust arrangement, with the decision resulting in a non-underlying curtailment charge of £4.3m.

Pennon chief executive, Susan Davy, said: "I am delighted to be leading the business at this important time in Pennon's history.

"The completion of the Viridor sale in July this year has seen significant shareholder value realised, allowing us to refocus our business on excellence in the water and wastewater sector.”

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