The FRS17 pension accounting standard has cancelled out stock market rises for UK based pension funds, says internatioanl consulting firm Watson Wyatt.
“For pension schemes, the recovery in equities over the past year has been largely cancelled out by increases in liabilities,” the firm says, adding that the overall deficit for UK pension funds under FRS17 was “little changed from a year ago” at £60bn (E89bn).
It warned that the deficit for all UK schemes “could be as much as double this figure” and called the standard a “highly volatile indicator”.
“The liabilities of pension schemes have increased because of higher inflation expectations and lower corporate bond yields,” says Watson partner Robert Hails. “The stock market recovery was clearly welcome but rising liabilities mean it has done little to eat into these accounting deficits.”