Mercer has claimed the new guidelines on IAS19 accounting standards will accelerate a trend to de-risking amongst UK pension fund. New guidance on how pension fund surpluses are treated on company balance sheets could have serious implications for the way employers view pension funding and investment risk and, ultimately, for how pension funds are invested in the future, according to Mercer Human Resource Consulting.
These guidelines mean that companies can only take credit for a pension fund surplus if they have the “unconditional” right to a refund of the surplus or if they can use it to reduce future employer contributions.
The new guidelines will have the greatest impact in countries which have strong minimum funding rules for pension funds. “This change will force many companies to consider where to position their funding targets and extent to which they should be taking investment risks with their pension plans”, David Fogarty, a worldwide partner in Mercer’s Financial Strategy Group, said. “In some jurisdictions such as the UK, the case for taking any future investment risk is being greatly eroded.”
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