...High Deficits Persist: Pension deficits continued to rise in 2014, mainly due to the effect of lower interest rates outweighing the returns on plan assets. The total pension deficits for a sample of 19 UK corporates increased by 38% (GBP14.2bn), and for a sample of 14 German corporates rose by 44% (GBP21.2bn). Cash Contributions Key: The impact of growing deficits on companies depends on the regulatory regime under which they operate. In funded schemes as in the UK, a deficit can rapidly lead to an increase in cash contributions. In unfunded ones companies are not required to maintain any particular funding level so cash payments are typically unaffected. Fitch Ratings does not include pensions as a debt-like item when calculating its leverage metrics but instead reflects cash contributions in its company-level forecasts. Longevity Improvements to Continue: The current low interest rates will eventually give way to higher ones. However, longevity assumptions have gradually increased over...
