UK - The rise in AA credit spreads has contributed to a £38bn (US$75bn) turn-around in FTSE100 company pension deficits over the past 12 months, leading to an aggregate surplus of £21bn.
Robert Gardner, partner and co-principal, Redington, said: "Many FTSE100 pension schemes are likely to show improved valuations since March last year. This is largely due to the rate used to value scheme liabilities under the IAS 19 accounting basis.
"However, this masks the true economic position of pension schemes and the magnitude of the risk that they continue to run."
Redington said under the proposed changes to pensions accounting unveiled by the Accounting Standards Board (ASB) in January, where liabilities would be calculated using gilt or swap rates, the overall funding position of UK pension schemes would have deteriorated from a deficit of £63bn as of 31 March 2007 to £124bn at the end of last month.
The company noted the theoretical gap between the IAS 19 and ASB-proposed valuation methods would have grown from £46bn to £145bn over the course of the past year, wiping out any surpluses.
Redington urged pension stakeholders to press for full disclosure of what the changes would mean for pension funds.
Partner Insight: In recent years, pensions administrators have seen scheme member engagement increase significantly. The advent of Pensions Freedoms in 2015 and the increased choices faced by members have led to a sea-change in the levels and types of...
Purna Bhudia looks at how the PPF's investment strategy has evolved, especially in the area of credit
Two consultancies have reported decreases in defined benefit (DB) transfer quotation requests in Q3, and said guaranteed minimum pension (GMP) equalisation could impact transfer activity.
The Association of Consulting Actuaries (ACA) and Royal London have proposed a "pensions pound" to "radically simplify" defined benefit (DB) pensions rights.