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Surplus, what surplus? (Part 1)
1st January ushered in IFRIC 14: a new accounting “interpretation” of accounting standard IAS 19. This interpretation, as IFRICs are known, effectively prevents a scheme sponsor from recognising a surplus in their balance sheet if they don’t have recourse to that surplus and could widen the reported scheme deficit where a more generous level of scheme funding is necessary to cover a shortfall in any minimum funding requirement. Meanwhile…
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Northern Rock adopts safety first approach
And now for some good news (relatively speaking). With an estimated £100m pension scheme deficit and uncertainty surrounding the company’s future, Northern Rock deftly moved over 90% of its defined pension scheme assets into bonds and cash, neatly sidestepping the equity market turmoil in the process. A scheme buyout may also be on the cards. And finally…
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Surplus, what surplus? (Part 2)
… just as the word surplus was re-entering the occupational pension schemes lexicon and the idea of moving into a new era of pension scheme surpluses had started to gain traction, along came the January equity market sell off, further compounding what has been the poorest start to the year for equities since 1935. In just a single day (21st January – the new “Black Monday”), it was estimated that £25bn had been wiped off the value of occupational defined benefit pension scheme assets, as world equity markets conceded up to 6% of their value in response to intensifying global credit concerns and a deteriorating outlook for the US economy. Although according to the latest NAPF survey of UK pension schemes, the proportion of defined benefit scheme assets invested in equities has fallen from 60% to 55%, for most schemes their equity weighting continues to present a significant asset liability mismatch in an IAS 19 world. Meanwhile…
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Hedge Funds find favour
Baring Asset Management reported that (in the quest for potentially higher returns and diversification) 48% of UK pension funds now invest in hedge funds, up from 16% in 2006. Despite the turmoil in global capital markets, hedge funds as a whole weathered the storm better than most mainstream equity markets in 2007, posting double digit returns in many cases.
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