Pension fund deficits more than temporary blip
Increasing deficits in pension funds are largely being blamed on the share market but commentators have indicated that CEO's should not rely on the markets to get them out of trouble.
Link:Businesses saved by FRS 17
But deficits could look worse when the controversial new accounting standard FRS17 takes effect in 2005.
Michael Rudge of Hazel Carr Pensions said: ‘Many commentators agree that the market is unlikely to show significant growth in the short term and it is likely that the markets will take many years to return to the heady peaks of the 1990s’.
Another reason for the pension fund deficit is because there is improved assumptions about how long people are living. Rugde comments that, ‘this will only reverse in the unlikely event that people will start dying earlier’.
The introduction of FRS 17 in 2005 will make the pension fund deficits more apparent as the level of reporting is increased revealing their volitality. “Act now and don’t rely on the stock markets to get you out of the pension hole,” says Rudge.