GLOBAL - De-risking defined benefit (DB) pension plans under new IAS19 accounting standards could bolster companies' balance sheets, according to Mercer.
Under the revised IAS19, companies will no longer use the expected return on assets for calculating pension assets, but rather a net interest cost based on the discount rate.
Jim Verlautz, principal at Mercer's Retirement, Risk & Finance Group, said: "Companies need to review their investment strategies and asset allocations to assess the possible accounting benefits of de-risking their DB plans by moving out of equities and into bonds."
He added that companies would no longer be "automatically rewarded" in their statements for holding growth assets.
According to Verlautz, there will be a "negative P&L impact" for companies with high equity allocations.
Further, he pointed out that the abolition of the corridor method introduced "greater balance-sheet volatility", particularly for those plans with heavy equity investments.
This may present another reason to consider a move from growth to matching assets, he said.
However, Verlautz also said that if balance sheet volatility was not a concern, companies that change from the corridor method may continue to support growth assets because "the risk of asset losses will no longer be presented in the P&L".
Dirk Schmallenbach, senior international consultant at Mercer Germany, said it was still unclear how this new discount rate - more or less based on AA corporate yields - would be calculated.
"There is still a lot of leeway," he said.
Thomas Hagemann, chief actuary at Mercer Germany, recommended companies check which risks they wanted to "continue to bear" and what their effects would be under the new standards.
One new regulation that should not be underestimated, according to Hagemann, is the requirement to list special risks in the appendix to the accounts.
This would include, among other things, a change in longevity or other actuarial assumptions for men and women. These would represent breaches of labour law and would then be made public, Hagemann said.