Pension chaos looms for p&ls.

One in five companies would change their pension schemes if the Accounting Standards Board’s new proposals for accounting for pension costs are enforced, according to a survey. Actuarial consultant Bacon & Woodrow’s survey draws on responses from nearly 200 participants from across the country. It found 93% of respondents are concerned about the increase in volatility in the profit and loss account arising from the proposed ASB standard. Some 89% are concerned about the large and fluctuating amounts which will appear in the company balance sheet while 20% of companies think the new accounting standard is likely to cause them to make a change to their pension scheme. Almost 15% of respondents said the proposals would lead them to alter the pension scheme investment strategy in order to stabilise reported pension costs. Some 68% of companies would accept an increase in cost of 1% of pay if pension costs could be stabilised, although this drops to 42% of companies if the increase in cost was to be 3% of pay. With consultation on the ASB’s proposals in the draft standard FRED 20 now over, Raj Mody, senior consultant and actuary at Bacon & Woodrow warned: ‘It’s a worry that 20% of companies would actually change their pension scheme. This is letting the tail wag the dog and the results suggest the ASB needs to investigate the reaction of analysts and shareholders to the new rules. This may reassure companies.’

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