Despite suggestions that private equity firms have been responsible for driving a significant number of pension funds into the control of Pension Protection Funds, companies backed by private equity firms account for just 29% of the pension schemes, according to the latest research by European independent corporate finance house Close Brothers.
The Pension Protection Fund is a statutory fund that was set-up in 2005 to safeguard pension funds. Its research also revealed that private equity-backed firms account for a smaller share of the companies whose schemes are currently in PPF Assessment Period, accounting for just 23% of the 175 companies with schemes in assessment.
Of the remaining companies with schemes in the PPF, 58% are privately owned and 13% are from publically listed companies. In the PPF Assessment Period, the remaining companies are 62% privately owned and 15% publically listed companies.
Head of the Close Brothers Pensions Advisory Group, Christopher Clayton, said of the findings: “This research dispels the unfair criticism private equity firms have received claiming they are responsible for a significant percentage of companies in the PPF. Private equity is plainly not a major catalyst driving company schemes into the PPF.”
Historically 70% of companies in the assessment period have gone into the PPF. Based only on the number of companies currently in the assessment period, a further 123 schemes are likely to join the PPF, which would treble the number currently covered by the PPF. This will significantly increase the burden on the PPF, which in August 2008 estimated that the total deficit in UK pension schemes was £91.6bn.