Broad powers given to pension regulator, FT 13 June

Letter to Editor from Professor Paul Klumpes, Tanaka Business School, Imperial College London

Sir, Your front page article "Warning over new pension fund rules" (June 7) highlights the critical role that actuaries play in determining the security and solvency of pension fund deficits to employees.

But it fails to mention the sensitivity of reported funding levels to a range of actuarial assumptions under either the minimum funding requirement or accounting rules. It also ignores the extensive powers granted to the pension regulator under the Pension Act 2004 to require employers to make good any shortfall in pension funds based on the accounting rules. But the greatest controversy is that pension trustees are not required to report the pension deficit in financial statements to members, in contrast to the onerous reporting obligations of the sponsoring employer to shareholders under FRS 17.

Instead, actuaries are merely allowed to judge, bodge and fudge, and trustees are actively preventing mergers and acquisitions on the basis of privileged knowledge about the funding status of pension funds that is not disclosed to the employee members whose interests they purport to represent. It is difficult, therefore, to reconcile the stated concern of the actuarial profession about balancing the need for transparency with enhancing the "safety and security" of pension promises made to employees.

Paul Klumpes, Tanaka Business School, Imperial College London, London SW7 2AZ