| New accounting standard puts pensions in peril - NAPF |
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| 15/02/2002 | |
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by Nat Mankelow New accounting rules are jeopardising the pensions of thousands of UK workers, according to pension fund association NAPF. The National Association of Pension Funds, which represents the interests of the £800bn industry, has revealed a survey of its members found 75 per cent of firms offering final salary, or defined benefit, pension schemes were less likely to do so because of FRS 17. FRS 17, introduced in June 2001, forces companies to represent pension fund liabilities on the balance sheet. According to NAPF, because of the perceived volatility attributed to FRS 17, company pension funds are ditching final salary schemes – or closing them to new members – in favour of defined contribution schemes, which lessens the pressure on firms to provide pension income. NAPF chairman Peter Thompson said: "We have been warning for some time that FRS 17 would drive many employers from providing defined benefit pensions, and that is what is now happening." However the introduction of FRS 17 has had its supporters. John Ralfe, corporate finance chief at Boots and a trustee of its £2.6bn pension fund, argues that FRS 17 brings a transparency and efficiency to the accounting process, benefiting the fund in the long run. Yet NAPF's Thompson maintains that FRS 17, on top of declining investment returns and the pressures on funds to confirm to the recommendations made in the Myners report, could prove to be final straw that drives firms away from offering final salary schemes. Already BT and ICI have frozen new contributions to their defined benefit pensions and FRS 17 critics argue more could follow suit. |
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