Pensions first, dividends later

The UK Pensions regulator has told companies that they will not be allowed to cut contributions to pension schemes if they are still paying dividends, making it clear that pensions must come before shareholder interests.

The regulator gave some relief to cash-strapped companies facing huge retirement cost burdens, saying that payment periods could be stretched out to restore deficits in pension schemes, of up to 10 years to complete a recovery plan.

Employers groups have pleaded to be allowed to put less into pension schemes in the current slowdown, and be given time to make up deficits. The pension regulator clarified that pension schemes have the legal status of unsecured creditors, and rank ahead of shareholders.