Delay over accounting standard for pensions

Employers in the UK have been given longer to comply with a controversial
accounting standard for pensions, which has been blamed by some firms for the
closure of final salary pension schemes.

The FRS 17 standard, which will mean that businesses will have to report
annual changes in the value of their pension funds in their main financial
statements, was due to have been adopted by firms with accounting periods
ending in June this year.

But the Accounting Standards Board (ASB) has extended the deadline for the
new system until 2005 following an announcement that the International
Accounting Standards Board is to introduce a similar international accounting
standard.

ASB chairman Mary Keegan said the decision to defer the implementation of
FRS 17 was taken to prevent employers having to change their pension accounting
twice when the international standard is introduced.

Businesses do not like the FRS rule because it forces them to report annual
changes in the value of their pension schemes.

Companies including British Airways and BT have partly blamed the FRS 17 accounting
rule for the closure of their final salary pension schemes.

The CIPD’s assistant director general, Duncan Brown, welcomed the decision
to defer the introduction of FRS 17 but said it would not take the pressure off
final salary pension (defined benefit) schemes in the long run.

He said: "The fundamental dynamics causing problems for defined benefit
schemes are not going to go away.

"The cost of schemes, which are heavily focused on the stock market,
are going up, funds are low, we are retiring earlier and people are living
longer."

Susan Anderson, CBI director of HR policy, welcomed the decision to delay
the implementation of FRS 17 but also called for changes to be made to the
standard.

By Ben Willmott

Schemes are showing deficit

A survey of 146 of the UK’s top
companies reveals that more than 60 per cent have pension schemes which show
deficit under FRS 17.

The study by Mercer Human Resource Consulting reveals that of
these, the deficit exceeds 10 per cent of scheme liabilities in 38 per cent of
cases. Nearly 40 per cent of firms have pension funds of a size exceeding 50
per cent of company net assets.

The report states: "Managing pension liabilities for many
companies has become critical because of their size relative to the overall
business and this is driving changes to benefit provision and investment
strategy."

www.mercer.com

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