BT could have its pension
deficit balloon to £4.6bn from £400m if it were required to report its
retirement liabilities and assets under new rules proposed last week by the
Accounting Standards
Board.
In a report for RBC Capital Markets, John Ralfe, an independent pensions
consultant, notes the proposed rules draw attention to an aspect of BT’s risk
management which is now under scrutiny because of the scheme’s heavy reliance on
investment in equities to make up the shortfall, the Financial Times
reports.
‘What gets measured gets managed, so increased transparency should change
management behaviour and improve the management focus on pension costs and
risk,’ Ralfe said.
At the heart of the ASB’s proposed rules is the recommendation pension
liabilities be discounted at a risk-free rate of return, rather than the yield
on AA-rated corporate bonds. It also suggests that, instead of using expected
returns on assets as a contributor to profits, companies should use actual rates
of return.
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