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Survey of pension plan accounting assumptions

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29 Dec 2005

Watson Wyatt Worldwide has published 2005 Global Survey of Accounting Assumptions for Defined Benefit Plans.

The report contains 2004 pension assumption data for 356 companies in 25 countries. 82% of the survey participants report under FAS 87 Employers' Accounting for Pensions; 11% under IAS 19 Employee Benefits; 6% under FRS 17 Retirement Benefits (UK and Ireland); and the remaining 1% percent under other national standards. The US retirement plan data on FAS 87 assumptions is derived from information reported in corporate annual reports. The non-US information was collected using a survey form. The report includes tables showing by country, among other things:
  • Background economic data - Bond yields and CPI+.
  • Discount rates are used to calculate the present value of pension obligations and the service and interest cost portion of pension expense.
  • Expected rates of return on assets.
  • Salary increase assumptions.
  • Spread between the average discount rate and salary increase by country.
  • Estimated social security increase, in those countries where the plan formula takes into account social security.
  • Estimated pension increases, in those countries where either pensions are required to increase or there is a substantive commitment to provide increases.
  • Whether pension assets are measured at 'market value' or 'market-related value' (the latter reflecting a smoothing of the value of assets over a period up to five years).
  • Average asset allocation.
  • Funded status based on projected benefits and also accumulated benefits.
The report may be purchased from www.watsonwyatt.com then click 'Research' then 'Research Reports'.

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