Introduction 1. Summary 2. Introduction and main findings 3. FRS17 to replace SSAP24 4. Market value methods 5. The continued defined contribution trend 6. Detailed analysis of Reports and Accounts 6.1 Disclosures 6.2 Actuarial assumptions Appendix 1 - Glossary of terms* Appendix 2 - Detailed disclosure listing Appendix 3 - Summary of FRS17

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Accounting for Pensions Survey 2001
Appendix 1  -  Glossary of terms

Actuarial assumptions	In order to carry out an actuarial valuation it is necessary to make a number of assumptions about the future. The most important assumptions are the financial assumptions and these should all be disclosed under SSAP24. They are the rates of: investment return, salary growth, pension increases and dividend growth.
Earnings Cap	The Earnings Cap, currently £95,400 pa, is the limitation introduced by the Finance Act 1989 on the amount of remuneration on which pension benefits and contributions may be based. It generally applies to members who joined a pension scheme since June 1989.
Equity Premium	The Equity Premium refers to the extra return that may be expected from equities above other assets classes such as bonds. The Equity Premium is regarded by some commentators as a reward for risk. Others believe it emerges as pension scheme trustees are rarely "forced sellers" in a market - their exceptionally long investment time horizon means that they can avoid selling equities during a down turn in the market, even if it lasts many years. Although controversial in some quarters, historical analysis supports the view that such a premium exists.
Investment return	The rate of investment return (ie the rate of interest expected to be earned in the future) is, typically, 6% to 8% pa. In looking at the other financial assumptions it is the difference between the rate of investment return and the relevant assumption that is more important than its absolute value.
Pension increases	The difference between the rate of investment return and the rate of pension increases is, typically, 2½% to 4½% pa but this will depend on the level of increases actually provided under the scheme.
Salary growth	The difference between the rate of investment return and the rate of salary growth is, typically, 1½% to 3% pa.
Dividend growth	The difference between the rate of investment return and the rate of dividend growth is, typically, 2½% to 4% pa. To gauge whether a particular assumption is less cautious (that is it would tend to lead to a lower cost than average) or more cautious (that is it would lead to a higher cost), the general rule is: the lower the difference between the investment return and either salary growth or pension increases, the more cautious. For example an assumed difference of 1½% pa between investment return and salary growth is more conservative than 2½% pa. For dividend growth, the higher the difference between the rate of investment return and the rate of dividend growth the more conservative the assumption. For example a difference of 4% between the assumed rate of investment return and dividend growth is much more conservative than an assumption of 2½% pa.
Spreading method	There are three main spreading methods used ie: percentage of payroll mortgage straight line Their effect on the pattern of pension costs for a scheme with a significant surplus can vary considerably as the chart shows. The straight-line method leads to the greatest initial variation, ie the biggest reduction in pension cost, for a scheme that has a surplus.
Surplus / Deficiency or Deficit	The difference between the value of the assets and the value of the accrued liabilities is termed surplus. If the value of liabilities exceeds the value of assets there is a deficiency or deficit.