June 2021
09Jun

U.K. government to mandate climate risk assessment by retirement plans

U.K. retirement plans with at least £5 billion ($7.1 billion) in assets will be required to assess and publicly report climate change risks in their portfolios starting in October under regulations presented to Parliament on Tuesday. The new regulations, which are subject to parliamentary debate, fall under the Pension Schemes Act 2021 and will require trustees to identify and evaluate climate risks and opportunities that may affect investment strategies over the short, medium and long terms. Investors will also be required...

June 9, 2021
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04Jun

Why retirees need to heed the ‘sequence-of-returns risk’ in their portfolios

When world markets took a nosedive in the early days of the COVID-19 crisis, many investors worried about the hit they saw on their returns in monthly statements. Those in the early days of retirement were particularly lucky that the pandemic-driven plummet proved to be short-lived. A prolonged downturn of that magnitude at the start of the period when you’re drawing on investments can have disastrous consequences on your long-term portfolio performance, experts say. Still, there are pre-retirement strategies that...

June 4, 2021
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03Jun

US. Pension risk transfer premiums hit record low – paper

Pension risk transfer premiums are lower than ever, according to a paper from pension risk consultant BCG Penbridge. The consultant was involved in 53 PRT transactions in 2020, involving the purchase of group annuity contracts by U.S. corporate pension plans to transfer a certain number of retirees and pension liabilities to one or more insurers. Among those transactions, 42 were full plan terminations, and the average premium was 101%. Among the 11 PRT transactions that involved retiree liftouts, the average premium was...

June 3, 2021
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02Jun

UK. Pensions Regulator Urges Robust Liquidity Risk Analysis

Trustees of retirement saving schemes have improved their understanding of the liquidity risks facing their programs, but they should be more robust when they analyze those dangers, a director at the pensions watchdog has warned. David Fairs, an executive director at The Pensions Regulator, said that major government and central bank intervention programs around the globe in late 2020 — such as lowering interest rates — helped to stabilize markets during the coronavirus outbreak. But interventions in the future cannot...

June 2, 2021
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May 2021
26May

Special Report: How to Ensure a Smooth Pension Risk Transfer

For employers, the number of reasons they should consider offloading some or all of their pension liabilities from their balance sheets seems to be growing every year. On average, beneficiaries are expected to live longer than they have in the past; generating returns to cover liabilities is becoming more challenging in a low interest rate environment; and premiums for the Pension Benefit Guaranty Corporation (PBGC) keep rising. Already, many plan sponsors are expected to power through deals this year. After...

May 26, 2021
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21May

US. Biden orders federal climate-risk financial strategy, with implications for homeowners, pensions and government contracts

President directs agencies to analyze and mitigate the risk climate change poses to the financial system, and he’ll use the findings in the budget process. President Joe Biden is mandating a federal government strategy to quantify climate-change risks to public and private financial assets. Banking, housing and agriculture regulators are among those who will be asked to use climate risk in their supervision of major industries, including the lending of federal funds and decisions on federal contracts. Some Department of Labor-regulated...

May 21, 2021
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04May

Surging Stocks Improve Pension Funding Levels, But De-Risking Isn’t at Risk

A strong stock market delivered the goods and then some for pension funding levels, both public and corporate, in the first quarter. But don’t expect companies to pull back from their campaign to shift into safer (if low-paying) bonds from stocks. That’s the conclusion from JPMorgan’s global market strategy team, which noted in a report that this development didn’t mean that corporate plans would ease up on their de-risking—that is, moving into bonds from stocks. Reason: Company defined benefit (DB)...

May 4, 2021
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April 2021
23Apr

Combining Flexible Asset Allocation, Sustainable Withdrawals, and Deferred Annuities to provide an Adaptive Lifelong Investing Solution

By Anran Chen, Steven Haberman, Steve Thomas In this paper, we integrate investment decisions in the post-retirement decumulation period with that of the deferred annuity purchase to provide a lifetime decumulation solution. Based on Monte Carlo simulation and historical experience, we use the Perfect Withdrawal Rate (PWR) as a tool to make recommendations on withdrawal rates and asset allocations for different levels of risk preferences. We have a few potentially important findings. First, we illustrate how cheap it is to...

April 23, 2021
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08Apr

Longevity Risk and Capital Markets: The 2019-20 Update

By David P. Blake, Andrew J. G. Cairns This Special Issue of the Insurance: Mathematics and Economics contains 16 contributions to the academic literature all dealing with longevity risk and capital markets. Draft versions of the papers were presented at Longevity 15: The Fifteenth International Longevity Risk and Capital Markets Solutions Conference that was held in Washington DC on 12-13 September 2019. It was hosted by the Pensions Institute at City, University of London. Longevity risk and related capital market solutions...

April 8, 2021
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01Apr

Understanding Social Insurance: Risk and Value Pluralism in the Early British Welfare State

By Rachel Friedman This article seeks to make two contributions to the understanding of social insurance, a central policy tool of the modern welfare state. Focusing on Britain, it locates an important strand of theoretical support for early social insurance programs in antecedent developments in mathematical probability and statistics. While by no means the only source of support for social insurance, it argues that these philosophical developments were among the preconditions for the emergence of welfare policies. In addition, understanding...

April 1, 2021
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