UK - The FRS17 accounting standard provides a "false degree of comfort" to companies attempting to deal with the funding of their pension schemes, according to James Frazer, head of LEK Consulting's financial services.
In an interview with Global Pensions, Frazer remarked on the level of inaccuracy actuarial valuations provide for pension deficit calculation because key factors such as longevity were not factored into the equation.
He said: ”My concern over the FRS17 numbers is that it provides a false degree of comfort. Secondly in a lot of cases it is known to be an underestimate because they are not taking into account future improvements in lifespan which is a important risk pension funds face.”
Frazer recently claimed the combined deficit for the top FTSE 100 could be up to £150bn, three times higher than the FRS17 would have it, but since stressed the figure could also be £0 and that main cause for concern should not necessarily be focused around the debt.
The claims are broadly supported by industry research recently published by the actuarial Pensions Board which concluded that costs associated with securing deferred benefits are “significantly higher”, due mainly to matching and reinvestment effects which actuaries “should make suitable allowance for”.
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