Introduction 1. Summary 2. Introduction and main findings 3. Pension accounting in turmoil 4. The fate of the defined benefit scheme 5. Detailed analysis of SSAP24 disclosures 5.1 Disclosures 5.2 Actuarial assumptions 6. Detailed analysis of FRS17 disclosures 6.1 FRS17 results and key assumptions 6.2 FRS17 and balance sheet risk Appendix 1 - Detailed SSAP24 disclosure listing Appendix 2 - Detailed FRS17 disclosure listing Appendix 3 - FRS17 risk measures

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Accounting for Pensions Survey 2002
Detailed analysis of SSAP24 disclosures

	Actuarial assumptions
	SSAP24 does not specify what assumptions should be disclosed referring only to “a brief description of the main actuarial assumptions”. Wide variations exist in the assumptions adopted.
Investment return	The level of investment return assumed depends on whether a discounted income or market value method is employed. We have therefore separated the two types of valuation in our analysis. Under discounted income methods assets have tended to be taken into account at less than their market value, but a higher investment return is assumed. The range of investment returns assumed is shown in the charts below. Where companies have assumed a different rate of investment return before and after retirement, we have taken the pre-retirement assumption.
Investment return over salary growth	The rate of salary growth assumed has a significant effect on the eventual pension cost. The smaller the “gap” between the assumed rates of investment return and salary growth, the more conservative the assumptions. The difference between the investment return and assumed salary growth could be analysed for 83 companies. The difference varied from less than 1% pa to over 3% pa. One can clearly see that the average difference under the market value methods is less than under the discounted income methods. This results in a higher disclosed pension cost under the market value methods.
Investment return over pension increase	79 companies disclosed sufficient information to enable the difference between the assumed rates of post-retirement investment return and pension increase to be determined. Again one can clearly see that the average difference under the market value methods is less than under the discounted income methods. This results in a higher disclosed pension cost under the market value methods.
Assumptions used to value assets	Under a discounted income method, the value of the assets is highly sensitive to the difference between the investment return and the dividend growth rate. 34 companies using the discounted income method gave sufficient information for us to determine the difference between the assumed rates of investment return and dividend growth. It is clear that the dividend growth assumption has generally increased (and hence the gap has reduced) to reflect the current economic environment.
Sainsbury	Sainsbury assumed dividend growth 2½% pa in excess of inflation and only 1½% pa below the assumed investment return. This is outside the normal range adopted by other FTSE 100 companies. On the face of it, they are placing around twice the value on equities as a company using a typical dividend growth assumption of 3%-3½% pa below the assumed investment return. Whether this is in fact the case is not explained in the accounts.