UK - The sea-change in pension design which accounting standard FRS17 triggered in the UK is set to be repeated throughout Europe, Watson Wyatt claims.
The adoption of international accounting standard IAS19, which requires EU firms to include the cost of providing employee benefits in their accounts, will result in a review of scheme design for many companies, Watson Wyatt partner Eric Steedman believes.
He accepts that the new rule, which takes effect from next year, will not be the only factor driving change.
But he adds: “Because it will encourage more board-level interest in pension obligations, it will inevitably lead boards to ask questions such as ‘Have we got the right benefit design?’ and ‘Have we got the right investments held against the benefit obligations?’.
“This in itself is likely to lead to changes.”
He added: “The introduction of FRS17 in the UK has been cited as one of the drivers moving companies from DB towards DC.
“It would be a bridge too far to say that IAS19 will lead to a wholesale move towards DC, but it will inevitably have an effect on the way companies consider their pension obligations and plan design.”
Steedman made the comments to Watson Wyatt partner and Simplification Report Alan Pickering in the latest of the consultant’s Rewarding Conversations web-based video interviews.
The video can be viewed at http://www.watsonwyatt.bright-talk.com/brightcast/esteedman120704.
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