The CFA Society of the UK, supporting ASIP, CFA and IMC professionals.

 Sat 04 Jul 2009

UK Society of Investment Professionals - CFA Institute

Pensions accounting – Survey Results

The society has responded to a consultation paper from the Accounting Standards Board (ASB) on the perennially contentious issue of financial reporting of pensions.

The paper raised two key questions:

1) Should a pension scheme’s liabilities be based on

a) Expectations of employees’ pensionable salaries when they leave service, or

b) On current salaries


2) Should liabilities be measured at the risk free discount rate?

The society took the opportunity to survey members for their views. 65% voted felt that expected future salary increases should not be excluded from the calculation of liabilities. 53% supported the use of the risk-free rate to calculate pension liabilities.

This indicates that: members do not want to lose sight of the expected impact of future salary increases on a company’s pension obligations. They also prefer (by a small majority) the risk-free rate, which would result in a more conservative view of the liabilities than the present discount rate.

See the society's response to the ASB.