View more on these topics

Accounting rules pose threat to DB schemes

Scottish Equitable is warning that new company accounting standards could force the closure of many defined-benefit schemes and threaten the retirement options of thousands of employees.

ScotEq believes that the Inland Revenue&#39s FRS17, which requires firms to show the state of their pension scheme on the balance sheet, could be the final straw for employers with defined-benefit schemes.

Director of pensions development Stewart Ritchie says the additional burden could motivate thousands of employers to close their defined-benefit pension schemes for fear that inclusion on the balance sheet may make them appear insolvent.

ScotEq says defined-benefit schemes have been hit by falling stockmarket returns, longer life expectancy and changes to pension rules and taxation. Ritchie believes the problem is exacerbated by dwindling pension fund surpluses and the possibility of ongoing contribution holidays.

If schemes are shut down, Ritchie says employees will turn to alternative arrangements such as defined-contribution schemes which could leave pensions severely depleted from stockmarket falls.

He also fears they could be affected if Chancellor Gordon Brown makes another raid on pension funds in this year&#39s Budget.

Ritchie says: “If everything else in the defined-benefit garden were rosy, FRS17 might be merely an irritant but it is only one of many straws on the back of the employer with a defined-benefit scheme.

“Virtually all employers offering these arrangements must be reviewing the decision to offer such a scheme.”

Recommended

Misys wants 3,000 IFAs for new loan network

IFA mega-network Misys is aiming to recruit 3,000 mortgage intermediaries to its new mortgage network by the end of the year.Misys Lending Services, which starts in April, will target the 4,500 members of Countrywide, Kestrel, IFA Network and Financial Options as well as former tied agents and intermediaries who want to enter the mortgage market.It […]

The value-based management approach

Companies around the world are managed in various ways. Some are focussed on maximising sales whilst others believe that diversification is the way to success.Whatever approach is used, the ultimate aim for shareholder-owned businesses is to make money.This may be placed in context by the individual company&#39s desire to maximise profit whilst living within its […]

IFAs are urged to move into general sector

The move to bring general insurance and mortgage advice regulation under the FSA is an opportunity to market general insurance alongside life products, according to Swiss Re.At the annual Health Insurance conference in London last week, Swiss Re technical manager Ron Wheatcroft said IFAs looking to expand their businesses should consider combining general insurance with […]

Wentworth Rose simplifies annuity application

IFA Wentworth Rose is simplifying the application process for people seeking higher annuity payments by combining the medical questionnaires they need to complete. Instead of having to fill out up to seven different forms, clients of Wentworth will only have to complete one in order to receive a quotation from annuity providers. Wentworth claims the […]

Frexit & contagion risk in Europe

Many commentators have suggested that the UK’s exit from the European Union will trigger a domino effect, leading to its eventual break-up. Neptune’s Rob Burnett discusses the likelihood of this happening. Read more: Important information Investment risks Neptune funds may have a high historic volatility rating and past performance is not a guide for future […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment