More than three quarters of the Global Pensions 100 Panel have no intention of reducing their equity exposure as a result of recent changes to International Accounting Standards.
The findings contradict predictions by Mercer that pension funds will continue to shift away from equities to bonds as a result of the latest changes to IAS19. The consultant said the changes, announced last month, would prompt companies to review their pension allocations and investors to review the effect of pension risks on companies.
Mercer global accounting standards group principal Warren Singer said: “Pension plan investments in equities will no longer directly lead to increased reported company profits, even if equities produce superior asset returns over the long term in line with consensus forecasts.”
However, 42.9% of the 100 Panel said they did not follow IAS, while a further 42.9% who do said they would not change their equities allocation. Some 14.3% said they would.
One respondent said the changes made by the IAS were “short-sighted and arrogant”. He added: “Pensions are not the problem. Failure to effectively separate corporate plans from their sponsor’s balance sheet is the problem. Regulation should be focused on mandating consistent funding of existing pension plans in good times and bad on an ongoing and consistent basis. The long term implications of this knee-jerk regulatory reaction is likely to be dire.”
To read more changes to IAS19, click here
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