ABI: Better information on pension deficits needed

ABI: Better information on pension deficits needed

ABI: Better information on pension deficits needed

The ABI today published a research paper, “Understanding Companies’ Pension Deficits”. The paper analyses existing ways of measuring the pension deficits of occupational defined benefit schemes. It concludes that FRS17 numbers alone give an incomplete view, and proposes use of other data alongside FRS17 to improve understanding.

Stephen Haddrill, the ABI’s Director General, said:

“We need to understand deficits better to devise investment strategies which really deliver the best value for beneficiaries and sponsoring companies. If trustees and sponsors do not have a complete picture, pensioners could lose out badly. This paper is a valuable contribution towards improving the clarity of information on pension deficits. We encourage international standard setters to draw on its findings in setting a new accounting standard, and trustees to use it in assessing the health of their pension fund”.

The research paper was sparked by concern that volatile deficits reported under FRS17 could spur pension funds to adopt investment strategies that failed to maximise returns for beneficiaries.

The paper concludes that while the FRS17 accounting standard has provided a useful headline figure of a company’s pension deficit, additional information, particularly relating to the timing of cash-flows, is needed to build up an accurate picture of the scheme’s ability to meet its pension liabilities. This will help investors to make more informed decisions, and benefit trustees and regulators by allowing them to identify schemes that are genuinely most at risk.

Notes for Editors

1. The ABI is the trade association for Britain’s insurance industry. Its nearly 400 member companies provide over 94% of the insurance business in the UK. It represents insurance companies to the Government, and to the regulatory and other agencies, and is an influential voice on public policy and financial services issues. ABI member companies hold up to a sixth of all investments traded on the London Stock Exchange, on behalf of millions of pensioners and savers.