Companies are increasingly likely to end their final salary pension schemes
because of concerns over new accounting rules.
A survey by the National Association of Pension Funds shows more than
three-quarters of firms with final salary schemes are considering ending them
because of the FRS17 accounting standard.
The standard will require companies to show the assets or liabilities of
their pension schemes in their internal accounts.
NAPF chairman Peter Thompson said: "We have been warning for some time
that FRS17 would drive many employers from providing defined benefit pensions,
and that is what is happening.
"NAPF has always supported better disclosure of relevant information,
and would welcome an accounting standard which reflects the long-term nature of
any pension promise. But bringing snap-shot accounting into the accounts of the
sponsoring company will not only invite confusion among investors, but will
lead firms to question whether it is worth their while continuing to offer a
good quality final salary pension scheme."
Thompson said several final salary pension schemes have already closed to
new employees and, in some cases, to existing employees with FRS17 being cited
as the main reason.
NAPF called for the Accounting Standards Board to have a re-think on the way
FRS17 is being introduced to try and ease employers’ concerns.
"On top of other pressures facing company pension scheme providers,
FRS17 will too often prove the final straw which drives firms away from
offering such schemes. In doing so, it will jeopardise the Government’s aim of
reversing the present 60 per cent state 40 per cent private split of pension
provision and threaten the retirement incomes of thousands of tomorrow’s
pensioners," said Thompson.
By Ben Willmott