Having witnessed strong returns on assets over the last 12 months, many scheme sponsors could be, optimistically, looking forward to reporting improved balance sheet positions in 2015. Unfortunately, record low bond yields are likely to have more than offset these gains for most schemes due to their effect on liability valuations. Pension costs charged through the P&L will continue to rise, with further increased charges likely next year as a result of forthcoming changes in pensions accounting standards.
In this Spence Special Report on Pensions Accounting, we describe the asset/liability balancing act in light of market movements over the past year. To help draw attention to the practical implications, the effect on a typical scheme is illustrated.
We also review recent developments in the arena of pensions accounting, highlighting issues that may be of interest.