Quarterly Guide to Pensions Accounting

28 October 2016

Q3 Quarterly Assupmtions Guide IAS19 report cover

This guide is intended for use by finance directors in discussions with their actuaries and auditors on the actuarial assumptions to be adopted for recognising pension assets and liabilities in financial statements. It is divided into five sections:

  1. Changes in market conditions since 30 September 2015
  2. Expected assumptions at 30 September 2016
  3. Recent developments
  4. Latest information from FTSE 100 company disclosures
  5. Simple guide to IAS 19

MARKETS BETWEEN 30 September 2015 AND 30 September 2016

  • The FTSE All-Share Total Return Index has increased by 16.8%
  • The MSCI World Index (GBP) has decreased by 2.2%
  • The iBoxx >15 year AA corporate bond yield index has increased from 3.1% to 3.4%
  • The FTSE 20 year fixed interest gilt yield index has remained unchanged at 2.2%
  • The Bank of England 15-year spot inflation rate has remained unchanged at 3.0%

AA corporate bond yields have increased over the year, which in isolation will lead to higher discount rates and a lower value being placed on pension liabilities. Expectations of inflation are broadly unchanged so overall we would expect pension liabilities to have decreased over the year, all else being equal. Other factors such as asset returns and contribution rates will also have an impact on the net position.


The expected range of assumptions at 31 March 2016 is as follows. For the discount rate and inflation assumptions we would expect more mature plans to adopt assumptions towards the lower end of the range indicated and less mature plans to adopt assumptions towards the higher end of the range indicated.

  • Discount rate 3.15% to 3.70%
  • Price inflation (RPI) 2.75% to 3.35%
  • Price inflation (CPI) 1.55% to 2.85%
  • Salary inflation 1.55% to 5.35%

Assumed life expectancy 25 to 30 years for a male now aged 60 (justified by nature of employee population or historic experience). 1 to 2 years higher for a male retiring 20 years from now.

The full report covers:


Proposed changes to IAS19 and IFRIC 14 | IFRIC 14 - Availability of refunds from a defined benefit plan| Remeasurement on a plan amendement, curtailment or settlement | Financial Accounting Standards Board (FASB) agenda consultation | Alternative approach to measuring the interest cost | FRS102 | Amendments to FRS 102 |Discount rates research project | Post-employment benefits research project.  


(This analysis is based on the most recent annual report available at 30 September for each FTSE 100 company with a defined benefit pension plan.)

Discount rate | Price Inflation (RPI) | CPI Inflation | Salary Inflation | Mortality

And a Simple Guide to IAS 19

Balance sheet | Income statement | Remeasurements | Disclosure items

Download the full report.