International accountant and shipping adviser Moore Stephens has warned that the latest valuation relating to the post-1978 (new) section of the Merchant Navy Officers Pension Fund (MNOPF) will place further financial strain on shipping companies involved in the scheme.
Under the valuation, the MNOPF trustees reported a funding shortfall as at 31 March 2012 of £492m. Although this is less than had been anticipated, it nevertheless represents an increase of £152m (discounted to £120m) on the deficit recorded in the 31 March 2009 valuation.
To eliminate the funding shortfall, the trustees have called for additional contributions with a present value of £120m as at 31 March 2012 under a recovery plan beginning from 30 September 2013 and ending on 30 September 2025. There is a payment by instalment option, but companies with a deficit of more than £250, 000 will have to submit to a new credit assessment in order to qualify for this.
Employers’ contributions for existing members are also increasing, from 15.5 per cent to 20 per cent, while active member contributions are going up from 9.5 per cent to 12.2 per cent.
Michael Simms, a partner with the shipping group at Moore Stephens, says, “These changes will come as a further body-blow to companies which have been under severe financial pressure for the past five years due to the global financial downturn and the combination of declining freight rates, increased competition and higher operating costs in the shipping industry. In addition to the principal sums required, companies will also have to factor in the cost of their accounting requirements and assess the impact on loan covenants and other banking arrangements. For those opting to pay by instalments, meanwhile, there is the additional cost of undergoing a new credit assessment, which is not insignificant. For shipowners already struggling to keep their heads above water, these increased pension costs represent an unwelcome, if not entirely unexpected, additional financial burden.”
*Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world’s leading accounting and consulting associations, with 624 offices of independent member firms in over 100 countries, employing 21, 224 people and generating revenues in 2012 of $2.3 billion.