You can read the letter in full here: https://www.parliament.uk/documents/commons-committees/work-and-pensions/Correspondence/180601-Chair-to-Geoffrey-Budd-Dixons-Carphone-pension-scheme.pdf
The letter comes after Dixons Carphone revealed 92 stores would be closed in a trading update last month. The update also confirmed the dividend would be maintained at 11.25p despite the pension scheme having an estimated deficit of £492 million in October 2017.
Dixons Carphone has projected pre-tax profits for 2017/18 of £382m, down from £501m in 2016/17.
Tom Selby, senior analyst at AJ Bell, comments: “Dixons Carphone is unlikely to be the only company facing difficult questions about the balance struck between rewarding investors through dividend payments and paying off historic defined benefit pension deficits. This attention has undoubtedly been sharpened after the high-profile failures of BHS and Carillion hit the pensions of thousands of members.
“There are no easy answers here, however. While clearly deficits need to be dealt with, dividends are an important part of the investment case of publicly-owned companies and dramatically scaling back rewards to investors to pay-off huge pensions bills could have significant ramifications on a company’s share price. These companies are often held by pension schemes as long-term investments so, ironically, solving the issue of pension deficits by cutting dividends could actually have a negative short-term impact on their funding position.
“Having said that, scrutiny is never a bad thing and it is hard to argue that many companies have been guilty of ignoring ballooning DB deficits in favour of paying dividends and investing today.”