Impact of Pension Accounting Rule Change on UK Pension ...课件.ppt

Sample and Data Sample: 80 industry matched pair firms (KW) Data: Accounting, actuarial data related to sponsoring firm and pension fund Integration hypothesis H1,H2: LEV, SFUND, PRET, FFUND (RUNI control) Risk Management hypothesis H3: SWITCH, PUT 精品文档 精品文档 Findings Pension asset / pension liability and leverage ratios. Terminating firms have lower pension funding and higher leverage Firms that frequently adjust their ERR are less likely to terminate The put option is just significant 精品文档 精品文档 精品文档 Defined benefit schemes: Employees and employers put money aside year-by-year into a fund that is managed by trustees. The fund pays out a pension to the retiring employee that is worked out based on the final salary and length of service. The alternative – contribution based schemes – build up a fund based on the contributions and their return on investment. The pension size is then whatever annuity the fund is big enough to buy when the person retires. Defined benefit schemes: effectively the company takes the risk – benefiting from the risk of gain (surplus) and responsible for making up the underfunding should that occur. The MFR introduced by the Pension Act 1995 made companies more likely to have to make a shortfall earlier. At the root of what we are looking at here is that UK companies do not seem to have had a “normal distribution of response” – willing to take contribution holidays when the scheme is in surplus, but not willing to make up shortfalls. Finance: Integrative hypothesis. The fund surplus or deficit is part of the company’s funding situation. Labour economics: the fund is part of employee remuneration and is a separate entity in its own right (the separation hypothesis) Insurance: a risk management approach. The company can manage the risk by getting rid of the scheme or by regularly updating the expected rate of return on assets. By observation some UK companies have sticky “ERR”s and some are frequent changers US evidence: (Thomas,