Research carried out by Lincoln Pensions reveals that accounting disclosures of FTSE 350 companies with UK pension obligations do not provide sufficient information to allow stock market investors, as well as other stakeholders, to fully appreciate the scale and volatility of the funding position of the defined-benefits schemes within their portfolios.
This is critical as, for many companies, they are the longest-term and most volatile liability on their balance sheet.
Better information would, according to Lincoln Pensions, assist stakeholders in monitoring the sponsor covenant standing behind schemes and help prevent more BHS-type situations.
Darren Redmayne, CEO of Lincoln Pensions, said: “We believe that many of the issues associated with recent high-profile cases, such as BHS and Tata Steel, could have been highlighted much earlier through greater transparency in the accounts.
“As pension deficits grow and the spotlight falls on DB pension scheme risk, it is becoming increasingly untenable for the one-size-fits-all IAS19 disclosure to appropriately reflect the commercial reality of many situations.”