01 March 2002
The public sector union added its voice to the growing number of organisations that believe the implementation of financial reporting standard 17 (FRS 17) will create more problems than it solves when it is introduced in 2003.
Police authorities this week lost their fight to prevent FRS 17 applying to police schemes, while many local authorities are unhappy with the standard because they fear it may lead to council tax rises.
But a Treasury source told Public Finance there was little chance of FRS 17 being reformed or delayed because it was too close to its implementation date and is merely an accounting standard that will not lead to the sort of fallout the union is claiming.
FRS 17 will require public sector employers to list their pension fund assets and liabilities as gains or losses on their annual revenue accounts. It values assets based on corporate bonds, which Unison claims greatly exaggerates the liabilities of pension schemes that are heavily funded in equities.
Glyn Jenkins, Unison's pensions officer, said that while FRS 17 would not increase the cost of providing pensions, its rapid introduction could 'cause chaos and loss to funds in future' as managers scramble to buy bonds and reduce equity holdings – which will affect pricing.
'FRS 17 must be reformed or suspended so that its impact can be reduced,' he said.
Unison leader Dave Prentis echoed Jenkins' comments at a seminar in London on February 26. He called on the government to introduce legislation protecting final salary defined benefit (DB) schemes, which are regarded as more lucrative than the cheaper defined contribution (DC) schemes seeping into the public sector.
MPs this week awarded themselves a 20% increase in their own DB scheme, while senior local authority staff – mayors, leaders, executive members and chairs – will be granted access to the DB Local Government Pension Scheme from April 1.
Prentis said the plans smacked of 'breathtaking hypocrisy' at a time when workers have been denied access to DB schemes. He also raised concerns that many public sector workers in outsourced companies are no longer offered access to an occupational pension scheme.
The TUC said this week that the number of UK employees without access to an occupational pension has risen by 1.6 million over the past decade.
PFmar2002
