CBI calls for end to final pensions accounting rules

The
CBI is pressing for changes to controversial accounting rules that could slow
the shift away from final salary pension schemes.

Digby
Jones, CBI Director-General, wants amendments to the FRS17 standard which
governs the way firms report pension costs in annual accounts.                                                                                                                             

In
a letter to the chairwoman of the Accounting Standards Board, Mary Keegan, he
said the rule values pension assets in a misleading way and urged the ASB to
allow firms to base the valuation of these assets on the average market value
over a period of up to three years.                                                                                                                      

The
CBI said FRS17 requires firms to base valuation of pension fund assets on
market values at a particular date and this means short-term fluctuations in
markets unduly influence asset values. This leads to unpredictable figures in
company accounts, giving investors misleading information which affects ability
to pay dividends, the CBI claims.

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The
CBI says exposure to market fluctuations is accelerating the number of
companies moving away from final salary schemes. It warns this may also
encourage fund trustees to adopt short-term performance measurements.                                                                                                              

The
CBI has urged Chancellor Gordon Brown to review of the adequacy of pension
incentives in the Budget. Its unpublished Budget submission says the Government
is in danger of not meeting the target for the private sector to provide 60 per
cent of pensions by 2050.