Fair value in pension funds thesis : case sudy : Caixa Geral de Depósitos

Abstract

The developed world is facing the problem of an ageing population. The ratio of active to inactive workers is decreasing, putting at risk the future solvency of the public social retirement schemes. Private pension funds are therefore increasing, which makes the understanding of whether they are reliably calculated and covered a relevant issue. Due to accounting rules revisions issued by the IASB (International Accounting Standard Board) and the FASB (Financial Accounting Standard Board), the principle of Fair Value has become more important during the last decade, despite criticisms that link it to the current financial crisis. This work studies the role of Fair Value in the biggest Portuguese Bank’s Pension Fund, namely its calculation and impact on financial statements. Based on public information, clarifications provided by the staff at Caixa Geral de Depósitos, benchmark and data analysis, the case-study supports the importance of Fair Value on pension funds and concludes that Caixa Geral de Depósitos Pension Funds are reliably calculated due to the several rules issued by IASB and the Portuguese supervisory entity – Instituto Superior de Seguros (ISP)