DB Liabilities Artificially High Due To Plan Sponsors Hanging On to Skills
16 August 2012 (PLANSPONSOREurope.com) – UK plan sponsor pension liabilities may be “artificially high” due to employers hanging on to staff in order to retain skills in the organisation, Henry Tapper, director at First Actuarial told PLANSPONSOR Europe.
This week, research from the Chartered Institute of Personnel & Development (CIPD) revealed that a one-third of UK firms are maintaining staff levels higher than they need in order to avoid losing skills, but will make redundancies if economic growth does not return soon.
Tapper said: “As most schemes assume that the real salaries of active members will increase faster than the notional salary revaluation of deferred members, liabilities will improve when the redundancies occur and may be seen to be artificially high at present as companies are artificially holding on to unnecessary staff.
“But I think most companies would rather see the growth feeding through – even if the liabilities don't decrease – it's better to have a fully solvent employer than a partially solvent pension scheme.”