November 2022

UK. Insurers face claims threat from pension fund LDI crisis

The events of the past few weeks are likely to result in claims and/or pressure on commercial relationships, particularly when pension schemes conduct their triennial valuations and agree new deficit reduction plans with employers. UK pension scheme managers and their insurers could face claims over their use of liability-driven investment strategies following the turbulence caused by Liz Truss's mini-budget There may be a surge in professional negligence claims against liability-driven investing (LDI) pension funds in the wake of the UK’s mini-budget. Claims...

How much does Europe spend on pensions?

Iceland Iceland’s pension system is rated by CNBC as the best in the world and yet remarkably it only spends 2.6% of GDP on retirees, the smallest amount in Europe. Pensioners are entitled to the full ellilífeyrir payment if they’ve lived in Iceland for 40 years. Retirees can apply for a basic pension, a pension supplement and a household supplement and all amounts are based on income. The regular pension age is 67, unless you have worked at sea for...

Nordic pension funds want to increase climate investments in emerging markets and developing economies

At COP27 in Sharm el-Sheikh, Egypt, the Climate Investment Coalition (CIC), in collaboration with the Nordic Council of Ministers, presented key investor recommendations to bridge the climate finance and investment gap by 2030 towards emerging markets and developing economies. This was made alongside an overview of Nordic pension fund progress within climate and clean energy investments in 2022. Despite financial challenges and a volatile economic environment, the first wave of pension fund reporting in 2022 indicates that the Nordic pension...

US. Rising Interest Rates Change the Math on Pensions for Some Would-Be Retirees

Higher interest rates are good for our cash and checking accounts but are not always good for pension holders. Rising interest rates have an inverse relationship to a pension’s lump-sum value. As interest rates increase, the value of a pension holder’s lump sum could decrease. Because of this, I am seeing more pension holders who want to take a lump sum do so now vs. waiting. I am also seeing annuity rates improve with rising interest rates, pushing annuity income...

UK. How Pensions Threatened Financial Stability

Speech By Sarah Breeden, Bank Of England Executive Director, Financial Stability Strategy And Risk, Given At ISDA & AIMA On the afternoon of 28 September, I found myself in a rather unusual position: having to explain to journalists why a part of the pensions industry, unheard of to most of their readers, had posed such a large threat to financial stability that it warranted intervention in the gilt market from the Bank of England. Financial markets globally had been volatile for...

Inflation taking ever bigger bite out of Greek retirees’ pension income

Pensioners in Greece are struggling to make ends meet as galloping inflation and high energy prices take a toll on household budgets. After they lost an average of 25 percent of their income during the Greek debt crisis-related bailouts (2010-2018), the recent jumps in food and heating costs take their anxiety up a notch. During a recent interview granted to Xinhua in a cafe in central Athens, Christos Vassilopoulos, 82, was adding up his monthly bills while sipping his coffee. The...

Italy to Boost Pension Spending in Bid to Keep Up With Inflation

Italy’s pensions will increase by 7.3% from next year to keep up with rising inflation, Finance Minister Giancarlo Giorgetti said on Wednesday. The boost to retirement payments, which is automatic in contrast to wage hikes, will bring relief to households hit by soaring energy costs in the European Union’s third-biggest economy but may further complicate the European Central Bank’s efforts to rein in consumer prices. Overall, spending on pensions will increase by more than €50 billion ($50.4 billion) through 2025, the...

UK expected to raise state pensions, benefits in line with inflation

Britain is expected to increase state pension and welfare payments in line with inflation in next week's budget, the Times newspaper reported. British Prime Minister Rishi Sunak is expected to announce the increases to ensure that the Nov. 17 budget is seen as fair and compassionate, the report said. The government will set out its fiscal plans in an effort to rebuild investor confidence after a "mini-budget" earlier this year caused borrowing costs to surge. New finance minister Jeremy Hunt will seek...

US. Climate investors eye midterms with caution

After an active year of federal policy in favor of climate technology, investors are preparing to go it alone should the midterm results change the tone in Washington. Why it matters: Private investors may have to step up and fund potentially risky, capital-intensive projects like battery-manufacturing plants or grid-resilience projects should federal funds and incentives be pulled back or stopped altogether. Context: Several Republican candidates in state and federal races have indicated that ESG initiatives, particularly from large asset managers running...

Japan’s GPIF reports 0.88% decline for latest quarter

Japan's Government Pension Investment Fund, Tokyo, said its portfolio ended the latest quarter with ¥192.1 trillion ($1.33 trillion) in assets, down 0.88%, or $11.6 billion, from the prior quarter. In a statement posted on GPIF's website Friday, Masataka Miyazono, the pension fund's president, said rate hikes in the U.S. and Europe to contain inflationary pressures stoked concerns of recession, depressing stock prices at home and abroad. But the dollar's continued gains vs. the yen during the quarter ended Sept. 30, to...