Association of British Insurers pans FRS17

An ABI study has warned
that pensions reporting standards could force companies running final salary
schemes into a more restrained investment stance, to the cost of their members.

The influential body gave FRS17 a lukewarm assessment in its
Understanding Companies’ Pension Deficits’ report stating that the
standard had ‘ample room for improvement’.

FRS17 – designed to disclose pension liabilities on balance sheets – was
introduced as a way to reduce subjectivity in the valuation of pension assets
and liabilities, but the ABI raised doubts.   

The body called for more comprehensive information on pension deficits to
avoid relying on a ‘headline’ value. It cautioned that headline figures, such as
the FRS17 deficit, were very volatile and effectively assumed funds would sell
the assets in the market and turn them into cash – the marked-to-market

The 52-page dossier stated that the problem with ‘balance sheet disclosure in
general and FRS17 in particular’ is that the information is condensed into a
single number on a standardised basis. It said that this only provided  a
‘static’ picture of a scheme at a given point in time, but failed to address the
risks of changing assets and liabilities.

Further reading:

Boards caught off balance

Tax changes fire life policy sales

ABI: make directors’ pensions

Related reading

Fiona Westwood of Smith and Williamson.