UK - Difficulties in comparing FRS17 valuations are leading to massive disparities, a consultant warns.
Lane Clark & Peacock's (LC&P) analysis of disclosures from 45 FTSE100 companies shows that their pension schemes have a surplus of £5bn under FRS17.
But LC&P's findings are contrary to earlier research by Mercer Human Resource Consulting which found that out of 59 recently published company accounts, nearly two-thirds showed an FRS17 deficit.
LC&P partner Alex White said the reason for such disparities was the difficulty in comparing FRS17 valuations because there was no uniform in the way in which assumptions are calculated.
As an example, Waite said that LC&P research found that the discount rates used by FTSE100 occupational schemes varied by three-quarters of a percentage point.
However Mercer’s head of investment strategy Andy Green disagreed and claimed that there was limited scope for discrepancies under FRS17.
Green pointed out that Mercer’s research found the discount rate used by occupational schemes only varied by a quarter percentage point.
“Where there are differences, it will be in salary assumptions, he said.
Waite claimed that LC&P’s research counters blame by unions and employers that the accounting standard was causing the demise of final salary schemes.
He said firms were using FRS17 as “a convenient hat to hang DB closures on”.
He added that the real reason for the closure of DB funds was a combination of high costs and falling investment returns.
Waite added: “When you objectively look at it, there are an equal number of schemes with (FRS17) surpluses and deficits.”
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