Pension liabilities shake-up will be “dagger in the side” of many final salary schemes

Radical plans to change the way pension liabilities are calculated has been described as a “dagger in the side” of many final salary schemes.

The Accounting Standards Board (ASB) yesterday proposed a massive overhaul of how companies present their pension balance sheets.

Among the proposals is that liabilities should be calculated based on gilt or treasury bond rates, rather than on the value of high-quality corporate bonds as at present.

This would increase the size of firms’ pension liabilities, slashing the number with surpluses from 40% to 2%, according to experts.

Marcus Hurd, senior consultant and actuary at pension specialist Aon Consulting, said: “The ASB proposals are another dagger in the side of final salary pensions schemes, which are already struggling to survive.

“According to our calculations, the changes would add approximately £120bn to the combined deficit of the UK’s 200 largest pension schemes.

“In reality, all the proposals do is add to the headache already faced by companies and fast forward the gradual demise of the UK’s final salary pension schemes.”

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