UK - Schemes must take urgent steps to explain FRS17 shortfalls to avert "widespread panic" among members, a consultant claims.
Analysts say FRS17 figures for companies with June year-ends, will show severe deficits in pension funding due to sharp falls in equity markets.
Hymans Robertson partner and head of actuarial practice Ross Russell said with this information in the public domain, schemes must be prepared for uproar among concerned scheme members. “There could easily have been a 10% movement in funding levels in a pension fund between March 31 and June 30. If a company doesn’t have enough assets to cover its liabilities this will show as a deficit in its pension fund.”
He added: “Even if this information doesn’t appear on the balance sheets, it will appear in a firm’s end-of-year results in some way. It is a big concern.”
Diageo group pensions and benefits director Steve Mingle said trustees and sponsor companies must act now to prevent any panic among pension scheme members over the figures. “Companies have to think about the reaction that the members might have when these results are published. Where the FRS17 ‘snapshot’ isn’t fantastic, members will need to be reassured that there isn’t a long term funding problem.”
NAPF investment director David Gould agreed and said it was a “worrying” situation for companies that have their pension funds heavily invested in equities. “This confirms that it is not an appropriate measure to balance your long-term and current liabilities together. We can only hope analysts will take this into account.”
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