PracticeConsultingPension shift causes protests

Pension shift causes protests

Proposals to bring domestic accounting rules into line with Europe has raised fears for UK industry's competitiveness. Chris Quick reports.

Fears are growing that proposed changes to pension accounting rules will increase profit volatility and reduce UK industry’s competitiveness.

Professional bodies representing both accountants and actuaries have raised concerns about the proposals put forward in an Accounting Standards Board discussion paper. The changes are intended to bring the UK’s current standard on pension accounting, SSAP 24, more into line with international standards.

Their main effect would be to replace the long-term ‘smoothed’ actuarial approach for measuring pension assets and liabilities with a market-value based system.

Although it accepted this basic principle, the Institute of Actuaries said this week the ASB needed to rethink its plans. It feared they could lead to greater volatility and higher overall pension costs in the UK than elsewhere, damaging the international competitiveness of British industry.

Michael Pomery, chairman of the institute’s pensions board, said: ‘It would be highly undesirable for accounting policy to drive investment strategy or scheme design. Initial surveys show employers are very averse to volatile pension costs. We strongly recommend the ASB undertakes further research into companies’ attitudes.’

He added: ‘The accounting standard will apply to UK final salary schemes with assets totaling #600bn and a combined membership of over 10 million people. It is important that sufficient time is spent getting any changes right, rather than rushing into untried, untested approaches.’

ACCA also raised concerns about the changes. While it supported the move to market values, it expressed concern about the ASB’s proposal that actuarial gains and losses be recognised immediately.

Professor Brian Rutherford, chairman of ACCA’s financial reporting committee, said: ‘We are surprised the ASB is putting forward the immediate recognition option in the critical area of actuarial gains and losses. We think that spreading gains and losses over service lives, as we do at present, is a better approach given the uncertainty of the estimates that are involved with long-term pension costs.’

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer