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‘120Bn blow’ to deficits in pension funding proposals

Pension experts are warning that proposed radical changes to pension fund calculations from the Accounting Standards Board could have damaging implications for defined-benefit schemes.

The proposals may force companies to use more conservative measures to calculate the value of their future pension fund liabilities.

Aon Consulting calls the proposals “another dagger in the side” of final-salary pensions and says they would add around 120bn to the combined deficit of the UK’s 200 biggest pension schemes.

Senior consultant and actuary Marcus Hurd says: “The proportion of schemes in surplus would fall massively from 40 per cent to 2 per cent, causing widespread panic and misunderstanding.”

BDO Stoy Hayward actuarial director John Broome Saunders says: “This is a real kick in the teeth for DB scheme sponsors, just when they thought they had their schemes under control. At a stroke, hard-earned balance sheet surpluses will disappear and, even worse, sponsors will find themselves facing an uncontrollable rollercoaster profit and loss ride.”

Pension consultant Ros Altmann says: “It is about time we recognised reality now, rather than trying to keep pushing pension costs into the indefinite future. This bravely attempts to inject more reality into reporting the true costs of employer defined-benefit pension promises. There is likely to be strong resistance from both industry and Government to many of the proposals which would, if adopted, cause reported pension scheme deficits and perhaps funding costs to rise.”

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