UK - Nearly two-thirds of corporate pension schemes show deficits under new accounting standard FRS 17, according to Mercer Human Resource Consulting.
In its latest survey on pension fund disclosure, which analysed 59 FTSE100 and FTSE250 company accounts newly published under FRS 17, deficits were shown in 64% of cases. In more than a third of cases, or 37%, the deficits exceeded 10% of liabilities.
Additionally, 58% of companies expected to see a reduction in net company assets at this time if they had adopted FRS 17 in full.
Overseas operations provided 53% of the total deficits disclosed. However, when only looking at multinational companies this percentage increased to 73%.
Commenting, Andy Green, Mercer’s head of investment strategy, said: Most schemes invest in equities with a view to out-performing bonds, with the expectation that this out-performance will support the delivery of benefits.
“With the recent fall in funding levels from poor equity returns, trustees are having to take account of the relationship between the strength of the fund and the company's commitment and resources when considering the security of members’ benefits. Other key findings included:
- around 36% of companies had pension fund assets greater than 50% of the company’s net assets. For 1 in 6, or 17%, the pension fund actually exceeded. corporate assets;- the proportion of companies stating that they only offer defined contribution pensions to new employees is now 30%. A further 15% offer new employees a mixture of defined benefit and defined contribution pensions. The remaining 55% continue to offer only defined benefit provision;- as pension funds invest more defensively, 1 in 5 now hold less than 60% in equities, compared to past figures at around 75%.
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