Pensions - Articles - Corporate balance sheets overstating pension liabilities


UK companies are at risk of overstating pension liabilities by up to £45 billion if they fail to take into account the full health impacts of the coronavirus pandemic.

 Research from XPS Pensions Group shows that COVID-19 has not only had a detrimental effect on short-term mortality rates, but that the wider health and economic consequences of the pandemic are also expected to slow the rates of improvement to overall life expectancy.

 XPS Pensions Group has worked with over 70 clients over the last year to reflect the impact of the pandemic on their balance sheets. When the full impacts of the pandemic were considered, companies found that their pension liabilities had reduced by between 1.5% and 3.5%*, with the variation explained by the demographics of the schemes. If these rates are representative of overstated liabilities across the UK pensions industry, British companies are overestimating their liabilities by as much as £45 billion.

 Accounting standards require company directors to set best estimate assumptions when placing a value on pension obligations. This means that consideration should be given to the impact of the pandemic on mortality assumptions to ensure that these remain a true best estimate.

 Simon Reddish, Head of Corporate Accounting at XPS Pensions Group, said “As COVID-19 becomes endemic, it’s vital that schemes are reflecting the latest research and data about how this it is affecting the population in their liability estimates. As we learn to live with the disease, schemes will have to do the work to make accounting for COVID in their balance sheets a routine.”

 Dan Auton, Head of Demographics at XPS Pensions Group, said “Successive lockdowns have had a notable toll on the population’s mental health and lifestyle, with general health suffering as a result. And the pandemic’s second-order effects – such as increased pressures on the NHS and a reduction in cancer diagnoses and treatments – are likely to continue to have an impact as potentially dangerous variants of the virus continue to emerge. This means that the Government’s promised additional NHS and social care funding is likely only to mitigate the impact the pandemic has had on the health care system, rather than act to boost future life expectancies. These factors will continue to reduce the rate of improvement in life expectancies compared to expectations pre-pandemic.”
  

Back to Index


Similar News to this Story

Wish list for the occupational pensions industry in 2025
As one year closes and another begins, it's an opportune moment to set our sights on the future. The UK occupational pensions industry faces nume
PSIG announces outcome of Consultation
The Pensions Scams Industry Group (PSIG), which was established in 2014 to help protect pension scheme members from scams, today announced the feedbac
Transfer values fell to a 12 month low during November
XPS Group’s Transfer Value Index reached a 12-month low, dropping to £151,000 during November 2024 before then recovering to its previous month-end po

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.