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
Ex-BHS owner Dominic Chappell has been ordered to pay a total of £87,000 in fines and court costs after he was found guilty of failing to provide The Pensions Regulator (TPR) with information.
The Department for Work and Pensions (DWP) has said it while believes in the benefits of consolidating defined benefit (DB) schemes, there are significant issues to overcome.
There is just one week left to register to enter the Workplace Savings and Benefits Awards 2018.
Nearly a third (32%) of employers believe new technologies, such as augmented and virtual reality, will play a part in benefits communications, latest research from Aon Employee Benefits reveals.