ASB pension ideas not backed by FTSE-100

A survey of FTSE-100 finance directors has uncovered major concerns over the Accounting Standards Board’s suggestions for new pension accounting treatments.

The survey, by actuary Bacon & Woodrow, showed predictability of pension-fund costs was the top concern of 86% of the FDs questioned, compared with 49% who wanted to be able to compare their costs against other companies.

In addition, 65% indicated they would consider changing their investment strategies from higher-paying equities to more predictable gilts and bonds to reduce volatility.

‘The concern is that they will be letting a change in presentational accounting standards drive a real-life decision on how pension schemes operate,’ said Raj Moody, a B&W spokesman. ‘It’s questionable that the ASB should be taking such a radical action.’

One treatment put forward by the ASB as a way of mitigating the effects of fluctuating pension fund values would be to record them in the statement of total recognised gains and losses. In B&W’s view, though, the STRGL approach was ‘mucking about at the edges’, and would not mask the volatility of valuations based on equity interest rates.

ASB chairman Sir David Tweedie hit back. He warned: ‘If people want to look at the bottom line, they are wasting their time.’ He added: ‘For managers, the bottom line is operations and finance; revaluing pensions is not. The STRGL approach recognises that.

‘Companies may be reluctant to move away from current practice, but we feel we can’t stay out of line. The ideas we’re raising are in line with the way the International Accounting Standards Committee is heading.’