The Daily Telegraph, via NewsEdge Corporation :
KPMG is one of Britain's biggest accounting firms, employed (inter alia) to audit company pension schemes, so it should surely boast the technical expertise to tell the difference between a defined contribution scheme and a defined benefit one. Yet when it came to the firm's own scheme, it needed the High Court to decide. KPMG invited the court to agree that it had been running a defined contribution scheme all these years, so that the risk should fall on the retired partners.
When the court disagreed, the firm appealed, and this week the Appeal Court threw the accountants out so comprehensively that it even refused leave to appeal to the Law Lords. The shortfall in the scheme will have to be found by the existing 553 partners, and at pounds 70m (in 2002) promises to make a nasty dent in the firm's operating profits. The very fact that there is a shortfall is a bit of a giveaway; in a defined contribution scheme, the question doesn't arise, since the nascent pensioner takes whatever the contributions have grown to, and buys his annuity. KPMG's case was that benefits were calculated without reference to earnings, but the court has disagreed. It's an important case, and a curious one.
KPMG is highly likely to be auditing your company pension (there are only three other big firms on the planet) and if they can't tell the difference between DB and DC, then it's a pretty poor lookout. In the increasingly frenzied game of pass the parcel being played between employers and employees faced with pension deficits, the small print is important. It's created lots of lucrative work for accountants, but KPMG may find the clients less inclined to appoint them in future.
Wednesday, August 03, 2005
KPMG does not know the difference between DB and DC?
Well, we all know there is a HUGE difference between accountants and actuaries. (Do I need to tell any actuary jokes?) But this press release is a rather harsh example of why a good HR consulting firm lime Mercer, Towers Perrin or Wyatt should be doing your benefits consulting and not a Big 4 firm.