Companies Warned on Big Dividends by TPR

Companies Warned on Big Dividends.

The Pensions Regulator last week issued yet another warning that it will be investigating companies that declare high dividends (a distribution of profits after corporation tax) when combined with too low company pension scheme contributions leaving defined benefit pension schemes with a significant pension fund deficit/shortfall.

To quote the TPR  on high dividends to shareholders signifies “the employer has greater affordability” to ensure pension funds are adequately funded.

Much has been written about high profile cases such as British Home Stores, with huge dividends declared to former directors and then company being sold for £1 with huge pension deficits and subsequently going into liquidation.

Comment

We have long argued that successive governments have ignored this.  We view it that if an employer attracts staff with perhaps a fantastic pension scheme and perhaps with lower pay, then they should not be allowed to declare any profit whatsoever until pension funds are funded correctly.

It is unpalatable that schemes close with huge pension funding debts leaving employees redundant and potentially in retirement difficulty and ‘pass the book on’ to the Pension Protection Fund.  Shareholders being free to retain their dividend profits.