UK - Finance directors should brace themselves to report higher pension liabilities as the credit spread falls back from its peak, HamishWilson said.
The actuarial and pensions consultant said directors with September 30 or December 31 year-ends should especially prepare to report higher gross and net pension liabilities.
HamishWilson senior consultant Gary Tansley said this was due to the margin between gilt yields and bond yields - the credit spread - falling back from its peak caused by the credit crunch, as bond yields start to ease following quantitative easing.
He said the credit spread has sharply declined in the last few months, recently falling to 1.5% compared with 2.7% at the end of March.
He explained bond yields had fallen to 5.5% per annum, representing a reduction of 0.7% per annum since the end of June, while marking more than a 1% drop since last year.
He warned it added as much as 30% to companies' reported pension liabilities.
Tansley said: "Although there has been a strong rally in equity markets over the past few months, the FTSE100 has only recovered to where it was at the end of September 2008.
"So, while the stock market rally will have gone some way in mitigating the effect of falling bond yields, accounting deficits are likely to be significantly higher than a year ago."
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