UK - The Association of British Insurers have slammed the FRS17 number used to calculate pension fund deficits claiming it gives an incomplete view, according to its research paper.
In the ABI research paper, “Understanding Companies’ Pension Deficits”, it analyses existing ways of measuring the pension deficits of occupational defined benefit schemes and concludes that FRS17 numbers alone give an incomplete view, and proposes use of other data alongside FRS17 to improve understanding.
ABI’s director general Stephen Haddrill said: “We need to understand deficits better to devise investment strategies which really deliver the best value for beneficiaries and sponsoring companies. If trustees and sponsors do not have a complete picture, pensioners could lose out badly.”
The paper said that FRS17 accounting standard has provided a useful headline figure of a company’s pension deficit, but additional information is needed to build up an accurate picture of the scheme’s ability to meet its pension liabilities, to help investors to make more informed decisions, and benefit trustees and regulators by allowing them to identify schemes that are genuinely most at risk.
Liability buyout vehicle, Synesis Life CEO Isabel Hudson agrees with the view that the FRS17 number is an inadequate measure of deficits and liabilities.
Hudson said: “The buyout number and FRS17 are also now being quoted in the media; people are now realising that FRS17 underestimates pension liabilities.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.