IAS19 ‘will cost companies billions’

Aon, the risk management experts, have estimated that the final draft of
IAS19 could take billions of pounds off company balance sheets.

The draft standard requires that employers who agree a funding target over
and above their pension liabilities under IAS19 should record the difference as
an extra pension liability.

Marcus Hurd, senior consultant and actuary at Aon Consulting, said the new
standard appeared to have ‘a negative impact on some companies’ balance

‘The negotiation between employers and trustees on agreed funding targets has
reached a new level of significance, because the agreed target may now also
appear on a company’s balance sheet,’ he said. ‘It remains to be seen how
actuaries and auditors will apply the rules in practice, but it is likely that
employers will be more reluctant to agree higher funding targets.’

Aon said the aggregate pension scheme deficit for the largest 200 UK pension
funds stands at just £2bn at the end of June after spending most of the month
in surplus.

Further reading:

Managing pension liability: risky business

Scramble to boost pension schemes ahead of PPF levy

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