Figures published by the Insolvency Service show 4,607 companies were liquidated between September and December last year, a 52% increase on the same period in 2007.
There were also 2,428 additional corporate insolvencies – administrations, receiverships and company voluntary arrangements – between September and December last year, a 220% increase on the same period in 2007.
Casualties from the recession are mounting and the wave of insolvencies predicted for this year will almost certainly include more defined benefit scheme sponsors.
Sean Weaver, a senior consultant at Watson Wyatt, said: “Trustees cannot afford to think of insolvency as something that only happens to other people’s employers.
“While some sectors are more obviously under pressure, hardly anyone is immune and a proud corporate history cannot be relied upon to keep the creditors at bay.”
Weaver said trustees had to be alert when sponsors are highly geared, particularly when they need to refinance debts or are danger of breaching bank lending agreements.
He added that trustees could demand too much cash and push companies towards insolvency, so that members would not receive full benefits under the Pension Protection Fund (PPF).
“This looks like a Catch 22 situation,” said Weaver. “But trustees can make benefits more secure without making a big dent in company cashflows. We’re seeing more trustees looking at negotiating a claim on company assets that can be enforced if the sponsor becomes insolvent.”
Since the last recession, the advent of the PPF means that the consequences of insolvency for members may not be as severe.
However, Weaver warned: “Unlike pension scheme benefits, the legislation does allow PPF benefits to be cut.”
