Pensions - Articles - Pension scheme deficits decrease in July

 Charles Cowling, Director, JLT Employee Benefits, comments: “Markets continue to hold up despite a challenging political backdrop. As a result IAS19 pension deficits (the deficit that is recorded in a company’s accounts) have continued to drift lower.

 “However these figures hide some pretty major problems. In recent days we have seen both Barclays and the massive USS pension scheme for university staff announce significantly increased funding deficits in their DB schemes. And it is the trustees’ funding deficit that drives contribution demands on companies. Those companies and pension schemes currently carrying out their 3-yearly actuarial valuation are likely to see significant increases in funding deficits and hence considerable demands for cash contributions.

 “Additionally new accounting changes are currently being considered by the International Accounting Standards Board (IASB). This may appear a minor technical amendment to a part of the IAS19 standard (known as IFRIC 14) but it could result in many companies being forced to recognise a substantially greater pension liability on their balance sheets than at present. The IASB is currently carrying out some work to determine the impact of its proposed changes, but potentially it could add tens of billions of pounds of additional liabilities on to the balance sheets of UK companies.”