Pension schemes should learn to accept volatile returns from their assets, Gissings warns.
The consultant said one of the major concerns expressed about the new accounting standard FRS 17 was the way in which volatility of the reporting entries’ will occur due to the likely mismatch between the measurement of asset performance against liabilities.
Gissings said: “Our view on the proposals is that, as we live in a volatile world we should expect volatile results. However, most companies and Finance Directors put a premium on stability and predictability.
“This is further reinforced by the fact that for many companies with a relatively mature DB scheme, the size of the assets and liabilities of the pension scheme can be quite large in relation to the company’s asset base.” FRS 17 is a set of new procedures by which companies must report the financial condition of their pension plans in their annual accounts. It will require – within three years – finance directors to measure and report on the face of the balance sheet the net difference between pension scheme assets and liabilities for the DB schemes that they sponsor.
The consultant added: “Changes in the pension scheme’s funding position will start to have a very significant part to play in company financial performance.”
The Pensions and Lifetime Savings Association (PLSA) is in the process of convening an industry-wide group to take forward the work of the Institutional Disclosure Working Group (IDWG).
The Transfers and Re-registration Industry Group (TRIG) has given its support to an initiative which aims to complete occupational pension transfers within three weeks.
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.