FRS 17 backlash underway

The row over FRS 17 has been one of the most curious financial debates of recent years. Surely a bid to improve transparency and accurate disclosure of pension scheme valuations is nothing but a good thing?

It seems logical but you wouldn’t think so judging by the number of companies that have decided to ditch their final salary pension schemes in favour of money purchase schemes largely because of the new accounting standard.

The debate has become so intense that even government ministers have been forced to take an interest in what might have appeared to be an arcane piece of financial rule-making.

But the summoning of Accounting Standards Board chief Mary Keegan by pensions secretary Alistair Darling to Whitehall for a standards summit was not the most remarkable thing about this whole odd episode.

More noteworthy is the fact that it would be impossible to conceive the same unseemly row we have witnessed in recent weeks at a time of rising equity prices. But the tide appears to be turning. This week we learn the City is beginning to have misgivings about its misgivings about FRS 17.

At least two banks are among the FTSE-100 companies thinking of going back to replacing their money purchase schemes with final salary schemes.

Why? Put simply they are struggling to recruit executives when the market-sensitive pension packages they offer is so much more uncertain (read generous) than their old final salary schemes.

Ironic? Certainly. Another example of short-termism in the City? Probably.

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