| UNISON pension criticisms fuel FRS 17 fire |
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| 01/03/2002 | |
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by Nat Mankelow The UK's biggest employees union, UNISON, has fuelled the FRS 17 fire by calling for its immediate suspension following an "alarming decline" in the number of defined benefit schemes available to its workers. UNISON is concerned about the pension provision of its 25,000 members in FTSE 100 companies and 40,000 members in private utilities, such as Lattice, of which Transco is a subsidiary, which has closed its defined benefit scheme to new members. According to the union, there are 2m fewer employees in defined benefit, or final salary, occupational pension schemes than a decade ago (5.6m in 1991; 3.8m in 2001). Unison adds that 200,000 have transferred to defined contribution, or money purchase, schemes, but the figure likely to be higher due to the recent closure of a number of occupational pension schemes. FRS 17, the accounting standard which forces companies to report pension fund liabilities on the company balance sheet, has been identified by its critics as causing the death of the defined benefit scheme. They argue that fewer firms will offer defined benefit schemes if the liability of doing so could distort figures on the company balance sheet. UNISON says there are numerous examples of its members being left without "adequate pension cover" because of the apparent shift to defined contribution schemes, where the liability is placed more on the employee. According to UNISON, two direct labour contracts awarded to May Gurney and A. McAlpine by Essex County Council did not offer new starters membership of an occupational pension scheme. A building maintenance contract awarded to Liverpool Maintenance Partnership by Liverpool City Council "forced" new starters to join a money purchase Scheme. And Birmingham University has closed its non-teaching staff pension scheme to new employees, putting them into a money purchase scheme instead. In terms of private sector pensions, BT and ICI are two noteworthy schemes that have frozen new entries to their defined benefit schemes. FRS 17 does have some admirers. Boots' John Ralfe, who is head of corporate finance and trustee of the £2.6bn Boots pension fund, suggests that FRS 17 encourages a best practice of pensions accounting, which will benefit members and company sponsors in the long-run. Others suggest that FRS 17 only benefits fully-funded schemes, whereas schemes in deficit will experience greater volatility in the financing of pensions. |
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