UK - The National Association of Pensions Funds (NAPF) has attacked proposals from the International Accounting Standards Board to change the way employee pensions are accounted as being pre-emptive and of being far more radical than what was supposed to be an interim assessment of a larger review.

The IASB's Phase One consultation on pensions accounting closed to submissions last week, but the paper launched in March this year has sparked criticism by pensions representatives  across Europe of both the body's proposals and their handling of the consultation. (See earlier IPE stories: New face to take on IASB pensions review and IASB proposals could force status change for BASF pensions)

In a commentary produced for IPE.com, Julian Le Fanu (pictured below), policy adviser for investment regulation and funding at the NAPF, said the IASB proposals were presented as "tidying up problems in pensions accounting that cannot wait" but instead "to some extent pre-empt the results of a later review".

At the same time, he noted the impact on a definition of contribution-based pensions - which do not fit the IASB's interpretation of defined benefit and defined contribution schemes - could hit several European pension regimes and concluded the proposal is therefore "not appropriate for what is intended to be an interim amending standard", adding "any problems requiring urgent action should instead be dealt with on the basis of existing standards".

One of the key concerns Le Fanu raises is the volatile nature of the markets - as recently experienced - could essentially discourage from providing defined benefit pension plans in the future were the IASB's Phase One proposals put in place as suggested, even though he notes long-term liabilities are "essentially stable from one year to the next" and any changes to asset values have little actual impact on a company's cash flow.

"There is a strong probability that many finance directors and company boards would react to apparent volatility in the accounts by closing schemes that are perfectly affordable, further undermining pension provision," said Le Fanu.

A full copy of the NAPF commentary on the IASB's proposals is available here.

If you have any comments you would like to make on the IASB pensions accounting review or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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