XPS: UK Schemes Sitting On £260bn Accounting Black Hole

In its 2017 Thematic Review, the UK audit watchdog, the Financial Reporting Council, emphasised the usefulness of DB sponsors not only presenting but also explaining alternative valuations to the accounting measure in their accounts.

On other key accounting assumptions, the XPS study broadly confirmed the findings of comparable studies this year from advisers KPMG and Lane Clark Peacock LLP.

In relation to discounting, XPS said UK sponsors used an average discount rate of 2.8% during 2018, across a range of 2.6% to 3.1%.

The consultancy added that schemes with a rate in excess of 2.85% were likely using a non-standard approach to discounting.

On life expectancy, XPS discovered that some 82% of DB schemes had updated their assumptions to take account of the recent slowdown in the rate of longevity improvement.

Finally, the XPS survey supported the view that the cost of implementing last year’s equality ruling had turned out to be lower than initially feared.

In October, the High Court in London ruled that employers must grant equal “guaranteed minimum pension” (GMP) payments accrued between 1990 and 1997 to both male and female workers.

XPS’s analysis showed that the cost of implementing the GMP ruling for most of the schemes in its sample was less than 1% of liabilities.

The XPS Group survey was based on an analysis of 150 of the firm’s clients preparing accounts under a range of different financial reporting regimes including International Financial Reporting Standards.