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Go-Ahead de-risks pension plan with switch to CPI increases
Go-Ahead Group announced on Wednesday that it and the trustee of its pension plan have agreed to change the reference inflation index for the purpose of annual increases to the majority of pensions payable by the plan.
The FTSE 250 passenger transport operator said that, from 1 April onwards, the Consumer Prices Index would be used to increase pensions in payment, rather than the Retail Prices Index.
It said the change reduced the financial risks of the plan, and enhanced the long-term sustainability of the scheme, providing an improvement in the security of plan members' benefits.
"This decision follows a detailed review by the group and the plan trustee, and a 60-day consultation process with relevant employees that closed on 7 March," Go-Ahead said in its statement.
As a result of the change, the IFRS balance sheet valuation of the group's pension liabilities reduced by around £40m, with Go-Ahead set to recognise a pre-tax, non-cash exceptional credit of that value in the financial results for the year to 30 June, with a corresponding increase to shareholders' funds.
There would also be a reduction of around £1m in the group's non-cash interest charge in future financial years.
"While the change will reduce the plan's liabilities as assessed by its trustee at the 31 March triennial actuarial valuation, cash contributions to the plan will not reduce as a result of the change," Go-Ahead added.