David Norgrove, chairman of the
regulator, has described as ‘bizarre’ accounting rules which have
unintentionally linked discount rates for calculating liabilities to the
fortunes of the distressed financial sector.
His remarks coincide with a study showing pension liabilities of the UK’s 350
biggest companies are understated by about £160bn because of the rules, the
Financial Times reports.
During the financial crisis, pension schemes have been using the higher
interest rates on corporate bonds as their discount rates, which is having the
misleading positive effect of pushing down liabilities.
‘It seems perverse that deficits measured in accounting terms seem to have
gone down because their liabilities have gone down,’ Norgrove said. ‘We have got
a bizarre situation. We don’t have a good handle on pension deficits.’
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