UBS proposes alternative approach to liability calculations

first_imgResearchers at investment bank UBS have proposed a ‘deficit repair’ approach to valuing pension deficits rather than the current International Accounting Standards model, known as IAS 19.UBS argued that the current accounting number was “not an appropriate number for valuation purposes” for defined benefit (DB) schemes. Using a discount rate linked to AA-rated corporate bond yields – as in the UK’s current approach to valuations – “inappropriately prices pension risk into fundamental equity valuations”, the researchers added.Two leading UK actuaries who spoke to IPE about the proposal agreed there was merit in UBS’ proposal.Under a deficit repair approach, DB scheme sponsors would discount their deficit recovery contribution using the sponsor’s weighted average cost of capital. Lane Clark & Peacock partner Tim Marklew said: “Depending on the company you look at and the situation, you could end up with either an upside or downside from [UBS’] approach.“One of the starting points in their analysis is that the accounting number is arbitrary. I firmly agree with that. There is no particular reason why pension schemes should be valued using the accounting measure. Tim Marklew, partner, Lane Clark & Peacock“It is based on AA corporate bonds and that is not based a robust economic reason. AA bonds are used for convenience. It is a useful starting point. It might do the job, if the pension liability is insignificant.“But if you really want to understand and value a pension liability, you need to go beyond that. And that is what UBS are attempting to do.”Aon Hewitt partner Lynda Whitney said UBS’ work was “useful” but not a replacement for current accounting methods. “There is more variability in how people approach their technical provisions and so although the cash agreement tells you what they are expecting, it says nothing about the context,” she said.Whitney also warned that UBS’ approach could result in less comparability across schemes.“It does mean you have to accept that two very similar schemes can have quite different funding plans,” she explained. “So you might have a scheme that is working on something closer to a long-term objective – say, buyout – but over a longer period than a comparable scheme with a focus on technical provisions and a shorter recovery plan.”Actuaries typically arrive at a figure for the deficit repair plan using a valuation approach, known as ‘technical provisions’, in co-operation with a scheme’s trustees, regulators and the sponsor.Technical provisions are the scheme’s own measure of its liabilities, or its own measure of its pension commitment. Each scheme, and its actuaries, will have its own way of totalling up its liabilities according to its asset portfolio, investment strategy, actuarial assumptions and the employer’s covenant.In the UK, technical provisions form the basis for the triennial funding negotiations between the scheme’s sponsor and its trustees.Under IAS 19, sponsors must project forward their liability in line with the plan’s assumptions and discount back using a AA-corporate bond rate before netting off any plan assets.Critics of this approach have argued that it tended to oversimplify a complex issue.They have also pointed to problems with a shortage of duration-matched AA corporate bond rates in the market place to be able to discount reliably .last_img read more

Body of missing Negrense fisherman found in Iloilo

first_imgPhilippine Coast Guard (PCG)-Negros Occidental chief, Lieutenant Commander Jansen Benjamin confirmed that the remains of 42-year-old Marlon Adigue Sr. were found yesterday off the coast of Barangay Nasidman in Ajuy, Iloilo.Adigue – resident of Sitio Pasil in Barangay 6-A, Victorias City, Negros Occidental went on a fishing trip on Friday evening along with 36-year-old Agustin Flors. Their boat sank after it was hit by a cargo vessel in the seas dividing Victorias City and Ajuy.Adigue was knocked off the fishing boat, while Flors managed to hold on to the fishing vessel. Flors later managed to get the fishing vessel back to Victorias City under its own power, despite the damage it had incurred in the ramming.Adigue’s remains has been brought to the Jaruda Funeral Homes and arrangements are now being made for the remains to be brought back to Victorias City./PN BY DOMINIQUE GABRIEL BAÑAGABACOLOD City – The body a missing fisherman who went missing after a cargo ship hit his boat has been found.last_img read more

Metamora man arrested after search turns up drugs

first_imgMetamora, Ind. — The Franklin County Sheriff’s Department says they arrested a Metamora man on multiple drug charges.According to the Sherrif’s department, David Heninger, 69, was arrested after officers executed a search warrant on a home in the 19000 block of Clayborn Street.Investigators received multiple tips from citizens regarding possible drug activity.The search turned up Marijuana, Drug Paraphernalia, and Legend Drugs.Heninger was arrested on the charges of Maintaining a Common Nuisance, Possesion of a Legend Drug, Possession of Marijuana, and Possession of Paraphernalia.last_img read more

Guardiola: “I want Messi to finish his career at Barça”

first_imgGuardiola closes in this way the rumors that placed Messi outside of Barcelona. Further, City coach talked about the tie against Real Madrid in the Champions League and Sterling’s injury, which is very difficult for the eighths: “It’s a problem. I don’t know if he will be healthy for the match against Madrid. It will be out for a couple of weeks. “Another of the injured of importance in the English team is Leroy Sané. Guardiola has spoken about his situation: “He is training with the group after his operation, but I think that even the selection stop (mid-March) will not be able to return to the pitch. “ The mess between Messi and Abidal caused a hurricane that still has repercussions. Today, at the press conference given by Pep Guardiola, the Manchester City coach has been asked about a supposed departure from the Argentine star and the Barca coach has been clear: “My wish is that Messi ends his career in Barcelona, ​​I think he will stay there. He plays for Barcelona and will stay there.”last_img read more