UK - Credit ratings agency Standard & Poor's is disputing many analysts' views that FRS17 poses a danger to quoted company values.
Reports issued by analysts at HSBC and Deutsche have signalled warnings of the dangers posed to companies such as British Airways, Serco, Ivensys and Cookson by their pension fund liabilities.
But Standard & Poor’s managing director Andrew Campbell-Hart offers a different analysis. He believes that while FRS17 might surprise some investors, it will not actually add to companies’ real liabilities.
He said: “We see two particular aspects of the changes arising from FRS17 which we think are actually credit strengthening.”
First, trustees would be less likely to put through large changes to benefits, as such increases could not now be spread over several years in the accounts.
Second, FRS17 rules will mean there are less distributable reserves, which will leave more money in companies for unsecured creditors.
Campbell-Hart said the main worry of credit analysts was the new minimum funding requirement, which is due to be set by the government within the next two years and, unlike FRS17, will seriously affect company cashflows.
Bacon & Woodrow partner in the investment practice Kerrin Rosenberg echoed this sentiment and said: Most managers we have spoken to say they look beyond the headline numbers to actual cash flows.
“We are still to be convinced and will be interested to see whether other managers follow Deutsche's initiative.
Deutsche’s January report identified UK engineering companies at risk from their pension schemes.
In November last year, HSBC UK strategist Steve Russell issued a report which used measures of pension costs and overall funding levels to identify companies most at risk.
By David Rowley
Life expectancy in the UK saw no improvement between 2015 and 2017 as the number of people aged over 90 hit a record high, latest Office for National Statistics (ONS) data reveals.
Self-administered pension funds spent £14bn on payments to pensioners in Q2 2018, but only received £11.4bn of contributions (net of refunds), latest Office for National Statistics (ONS) data reveals.
The Pensions and Lifetime Savings Association (PLSA) has named the 17 members of its inaugural policy board after a competitive application process with 60 candidates.