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IPE special report May 2018

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IMF calls for realistic actuarial measurement

GLOBAL – The International Monetary Fund has called for a more realistic actuarial measurement of pension funding.

“Among the issues in pension accounting that need to be revisited, realistic actuarial assumptions underlying the measurement of funding adequacy are essential,” the IMF says.

But it warned that a rapid change in view could do more harm than good.

“Caution is needed, however, to avoid an immediate large drain on the earnings of companies that could trigger a self-reinforcing decline in equity markets,” it says.

The IMF was also concerned about the lack of transparency and precision in determining private companies’ pension obligations.

“The transparency of these private pension obligations and their funding is limited, so it is difficult to assess their financial conditions with any precision,” the IMF said in a report on the global financial system.

But it was clear, the IMF said, that the weakness in pension funding that has been revealed by falling equity prices has shown up the “mismatch” between pension assets and liabilities.

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