Hans Hoogervorst discusses pension liability
08 Dec 2016
At the Institute of Pension Education in Rotterdam, IASB Chairman Hans Hoogervorst spoke about pension liabilities and the effect of a low interest rate environment.
In his speech, Mr Hoogervorst noted the need for the IASB to develop additional guidance on pension scheme designs to adapt to recent developments. In addition, he commented that the IASB’s liability measurement approach is well accept and that they “reject calls to fundamentally change pension accounting to eliminate or reduce pension deficits.” Further, he provided his views on macro-economic policies. He stated:
A return to more normal interest rates will reduce the pension liability and will be beneficial for the long-term health of the pension system. But even then, short-term pain seems inevitable, because a lot of damage has been done. While the pension liability will be reduced, there will probably be short-term harm to both your bond and stock portfolios. This is another reason why I do not believe that our accounting for the pension liability exaggerates the problem.
The full transcript of the speech is available on the IASB’s website.