On the go: Construction products manufacturer Dixon International Group has told the Work and Pensions Committee that actuarial pressures in relation to its defined benefit scheme “almost put us out of business and several times pushed us into loss”.
Dixon’s submission to the committee’s inquiry into DB schemes and liability-driven investments, taking place in the aftermath of autumn’s liquidity crisis, also claimed that member-nominated trustees struggle with the complexities of the pensions system.
The company, which employs 65 people and has a scheme with just over 100 members, said that a premature push towards gilts would only expand its deficit, suggesting that its actuarial deficit was around 230 per cent of what it needs to pay members.
“We are 80 per cent in equities, which have yielded over recent years between 5 per cent and 7 per cent” a year, it said. “Gilts only realise less. Consider the rate of inflation and we’d be going backwards.”
Warning of the complexity of pensions, Dixon said: “I can assure you that lay trustees struggle to understand the system.
“At one trustees’ meeting, a member-nominated trustee was asked why he was so quiet. He said, ‘I’m not as intelligent as you. I understand sines and cosines but not the pension, so I wait to see what others think and vote with them’,” Dixon continued.
“He resigned as a trustee and we cannot find anyone belonging to the scheme to replace him.”
Dixon claimed that its “most cautious trustee” blocked “various obvious improvements”, and “admitted this was because he didn’t fully understand the system so preferred to be cautious”.
It also claimed that actuaries view sponsors as “a big bad wolf” that “should be squeezed to the max”.
“One actuary turned to me with a smirk on his face and said, ‘If it were up to me, I’d wind the scheme up and present you with a bill of £11mn’,” Dixon said, adding that with annual turnover of £6mn, this would “send us to the wall”.
“We have been bullied by actuaries threatening a [Pensions Regulator] investigation, and likewise quoting all sorts of statutes/regs to push us to commission unnecessary reports to line their pockets,” Dixon claimed.
“It has become an industry which very few fully understand. The system as it stands is unfit for purpose and has damaged our collective fortunes gratuitously.
“We have been a zombie manufacturer, existing to serve the pension with nil investment in talent, plant, diversifying, etc. It has swallowed countless hours of management time,” it added, estimating this cost to be worth around £40,000 a year.
