GKN closes pension and injects £250m to plug deficit

GKN has moved to end its pensions worries by confirming the closure of its pension scheme and revealing plans to pump £250m into the fund to help plug a hole.

The FTSE 100 automotive and aerospace group announced the moves as it posted results for the six months to the end of June that were slightly ahead of forecasts.

GKN reported a 15pc rise in revenues to £4.9bn and pre-tax profits soaring 207pc to £559m, though these were on a statutory basis and did not take into account the weakening pound. Profits were also inflated by accounting rules on the valuation of currency hedges.

Stripping out these factors, revenue was £5.2bn, up from £4.5bn last time, with profit 14pc higher at £393m.

Nigel Stein, the firm’s chief executive, has previously railed against onerous legacy pension schemes for companies, saying that regulators make “overly conservative” assumptions about the cost of retirement schemes, thus holding back investment in products and capabilities that could lift sales and profits. Confirming the closure of GKN’S defined benefit scheme – a move agreed with pension trustees in the spring – Mr Stein said the firm had made “significant progress to address our UK pension deficit”.

The size of the funding deficit in GKN’S UK retirement schemes shrank over the past six months from £1.22bn to £1.06bn, a decline attributed to life expectancy not rising as fast as forecast. The planned £250m investment into the scheme is expected to reduce the current annual payments of £42m GKN makes to deal with the pension deficit. GKN’S Driveline unit, which makes components for vehicle drivetrains and represents half of group revenues, saw a 21pc rise in sales to £2.65bn in the six months. Trading profit was up 20pc at £207m.

GKN said it would pay an interim dividend of 3.1p, up 5pc.