“The government is seeking views on ways to provide more flexibility to encourage risk sharing schemes, rather than just final salary or defined contribution arrangements which are at polar ends of the risk spectrum. However, the IASB’s latest proposals could wipe out risk sharing arrangements and make employers potentially more inclined to stop defined benefit provision altogether.
“These proposals, if implemented, would mean that “risk sharing” arrangements like career average and cash balance schemes would be valued much more conservatively in the company sponsor’s accounts than final salary schemes, possibly using government bond yields rather than corporate bond yields as a basis. In current market conditions, this might increase liability valuations by more than 30 per cent.”
