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UK roundup: FRC expands Coats pension investigation

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The Financial Reporting Council (FRC) has expanded the scope of its investigation into the conduct of certain actuaries and accountants involved with Coats Group pension schemes.

The UK regulator has added one more actuary to the group it started investigating in July last year.

It has also decided to extend the period of investigation, to start from 2002 rather than 2004.

Thread manufacturer Coats Group, formerly called the Guinness Peat Group, has also been the subject of an investigation by the Pensions Regulator (TPR) in connection with sizeable deficits across three of its defined benefit schemes.

The FRC’s own investigation was launched following a referral by the Institute and Faculty of Actuaries in response to matters arising from TPR’s investigation.

TPR reached settlements with the company in December last year.  

Contrasting figures for July UK private sector DB funding

Deficits of private sector pension funds increased during July, according to estimates from JLT – but decreased according to PricewaterhouseCoopers (PwC).

JLT put the total deficit across all UK private sector schemes at £183bn (€205bn) at the end of July, up from £176bn at the end of June.

At £183bn, the deficit is back to where the consultancy estimated it was at the end of May.

The aggregate funding level remained at 90%.

Charles Cowling, director, JLT Employee Benefits, said: “It is the trustees’ funding deficit that drives contribution demands on companies. Those companies and pension schemes currently carrying out their three-yearly actuarial valuation are likely to see significant increases in funding deficits and hence considerable demands for cash contributions.”

He also flagged the prospect of accounting changes adding “tens of billions of pounds of additional liabilities on to the balance sheets of UK companies”.

The International Accounting Standards Board has proposed changes to a part of the IAS19 accounting standard, and is currently carrying out work to assess the impact of the proposed amendments.

The PwC figures, based on the consultancy’s Skyval index, put the deficit of private sector DB funds at £420bn at the end of July, down £40bn since last month.

This was mainly as a result of falling liabilities, with asset values relatively static, according to Steven Dicker, PwC’s chief actuary.

The funding position was 78.7%, the highest recorded by PwC since autumn 2014. The monetary value of the shortfall, at £420bn, is higher than it was three years ago, Dicker noted.

“Part of this is due to schemes not being hedged against the fall in gilt yields, to what have been historically low levels,” he added. “However, while this hedging would have reduced the disclosed deficit on the ‘gilts plus’ funding approach, it is important to realise this wouldn’t necessarily improve the actual long-term outturn for schemes.”

PwC’s deficit measure is different from JLT’s – instead of being based on IAS accounting measures it uses the target used by pension fund trustees to determine company cash contributions, as agreed between the trustees and sponsor.

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