Inflation expectations push up DB pension liabilities

by Taha Lokhandwala

More from this author

06 Nov 2012

  • Comments
balloons1

AN INCREASE in long-term inflation expectations has driven up FTSE 350 defined benefit liabilities by about 3%, according to outsourcing business Mercer.

The Mercer Pensions Risk Survey showed liabilities rising to £575bn in October from £560bn a month earlier. Assets also rose marginally by £2bn to £520bn, Accountancy Age's sister publication Professional Pensions reports.

This left IAS19 deficits at £55bn in October from £42bn in September, an increase of 31%.

Mercer said October's results reversed many of the gains made in September, and funding levels are now back to mid-year levels.

Head of DB risk at Mercer Ali Tayyebi said: "The outlook for long-term RPI inflation has increased again after the sharp decline during September, following the Office for National Statistics announcement of a consultation regarding the future calculation methodology for the RPI.

"It remains to be seen how much of the ultimate change the market is currently factoring into its outlook."

However, a review of the Retail Price Index presents a range of outcomes and potential opportunities, explains Mercer partner Adrian Hartshorn.

"If changes to RPI result in it being reduced close to the CPI calculation then this could lead to sharp adjustments – affecting both pension scheme assets and liabilities to differing degrees," he said.

"For many, but not all, this may have a materially favourable impact on the funding position of their schemes."

The survey comes after research from Mercer and the ICAEW showed scheme deficits were hampering companies' investments (PP Online, 5 November).

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

conservatoire-for-dance-and-drama

Finance-Director-part-time

Conservatoire for Dance and Drama, London, Permanent, Part Time, £60,000 pro rata

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.