Wednesday, 12 August 2009

Pension Deficit Snapshots - Pictures for Fools

This BBC report yesterday, which includes PPF figures that deficits in pension funds fell from £200bn to £158bn during the month of July, shows why focusing on the deficit at a moment in time is such a bad way of judging the state of a pension fund.

Pensions are long-term investments, so it's not sensible to make major decisions based on their state on a particular day. Don't take this from me, take it from Richard Christou, who wrote a magazine article last year saying:

"I personally believe that a snapshot on a single day, based on clearly defined criteria, is not the best way to analyse your liabilities."
Mr Christou was, at the time, Chief Executive Officer of Fujitsu Services. He sits on the company's Pension Policy Committee, the body that decided to propose closure of Fujitsu's main defined benefit pension scheme (the ICL DB Plan).

Perhaps employees should listen more to what senior executives say to each other than what they say to us?

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