Assessing the impact of pension liabilities on credit ratings

The European pensions debate continues with vigour as companies take action to address defined benefit (DB) scheme deficits and the UK has already passed legislation to protect scheme members. It is the intent of this paper is to provide insight into how Fitch assesses the impact of pension liabilities as part of its credit rating process. It will also cover the increased pressure placed upon UK corporates to channel incremental funds into defined benefit pension schemes, a measure which is likely to constrain operating and financial flexibility.