October 2023
09Oct

What’s wrong with private market valuations and why do UK pension funds care?

Britain's Financial Conduct Authority said last week a review of risks in markets for unlisted assets would check how valuations are being undertaken and whether any risks could spread into banking. WHY IS THE REGULATOR WORRIED? Stock markets and prices of government bonds have been hit by expectations of higher interest rates for a longer period than initially anticipated. Prices of private, unlisted assets have remained relatively high, raising questions about how valuations are conducted and if a reckoning is due. WHY...

October 9, 2023
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04Oct

90% of U.S. companies with DB plans looking for exits via PRT – MetLife

Nearly 90% of U.S. corporations with defined benefit plans look to fully transfer all their liabilities in an average of just four years, according to a new poll conducted by MetLife. In MetLife's 2023 Pension Risk Transfer Poll, the insurer said 89% of respondents said they plan to fully divest all their liabilities. Among that population, they plan to do so in an average of 4.1 years. Also, 94% of respondents said they are weighing the DB plan's value against the...

October 4, 2023
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September 2023
28Sep

Striking US auto workers want their pensions back, apart from higher wages

On picket lines around the country, auto workers aren’t just demanding higher wages. They want to get back their once-sacred retirement pensions. While United Auto Workers (UAW) members who were hired prior to the 2008 financial crisis have pensions, those brought on since have received 401(k) plans instead. The union is demanding the auto companies provide pensions for new employees and those who currently lack them. “We need to do something, because right now, if you came in after '07, you...

September 28, 2023
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19Sep

UK. Systemic risks’ in pension schemes’ inflation hedging – SPP

There are systemic risks with defined benefit (DB) pension schemes’ inflation hedging, the Society of Pension Professionals (SPP) has warned in its latest research.According to its Vision 2023 report, the inflation hedge of a DB scheme is imperfect because a Retail Prices Index (RPI) asset is used to hedge an inflation-linked liability, where the inflation linkage of the latter is limited by caps and floors. “This means the amount of index-linked gilt exposure needed will change as inflation levels...

September 19, 2023
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15Sep

Welfare Analysis of Housing in the Presence of Interest Rate Risk

By Servaas van Bilsen, Theo Nijman & Emiliana van Erk  We model the welfare losses of (i) the presence of a mortgage with required repayments, (ii) a minimum pension savings constraint, and (iii) imposing a suboptimal investment strategy. We develop a life-cycle model which considers housing and interest rate risk. For a reasonable set of parameter values, we find welfare losses of up to 2.41% (5.02%) if a homeowner with a 30-year fixed-rate (adjustable-rate) mortgage faces a minimum savings constraint of...

September 15, 2023
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15Sep

Risk Aversion and Savings Behavior

By Antoine Bommier, Francois Le Grand & Lionel Wilner This paper investigates the relationship between lifetime savings and risk aversion. First, we take a theoretical approach in a two-period framework with a very general non-parametric model. We show that risk aversion reduces savings in the presence of mortality risk. We then verify the negative impact of risk aversion on savings in a numerical exercise, with a multi-period setting where mortality risk is calibrated on actual demographic life-tables. Finally, we check...

September 15, 2023
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07Sep

US. Washington taking aim at pension risk transfer market, but is anything broken?

The U.S. pension risk transfer market is booming as more companies look to shed their pension liabilities, but changes to the rules governing such transactions could be coming, which is making some stakeholders nervous. "What I worry about is that we see something proposed that disrupts the system that's working well," said Kent A. Mason, a Washington-based partner at law firm Davis & Harman LLP and outside counsel for the American Benefits Council. "To me, where do you go from the...

September 7, 2023
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August 2023
25Aug

Longevity Risk and Capital Markets: The 2021-22 Update

By David P. Blake, Malene Kallestrup Lamb & Jesper Rangvid  This Special Issue of the Journal of Demographic Economics contains 10 contributions to the academic literature all dealing with longevity risk and capital markets. Draft versions of the papers were presented at Longevity 16: The Sixteenth International Longevity Risk and Capital Markets Solutions Conference that was held in Helsingør near Copenhagen on 13-14 August 2021. It was hosted by PerCent at Copenhagen Business School and the Pensions Institute at City,...

August 25, 2023
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25Aug

Global Pension Risk Transfer Monitor: Record H1 Transaction Volumes in UK and US

-The Legal & General Group’s Global Pension Risk Transfer (PRT) businesses – Legal & General Retirement Institutional (LGRI), the United Kingdom’s longest-serving active PRT provider and Legal & General Retirement America (LGRA), a leading provider of pension risk solutions in the United States – today released the latest edition of the Global PRT Monitor, which analyses industry trends and market outlooks in the UK and US. In the US, the Monitor found that last year’s record momentum for US transactions...

August 25, 2023
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24Aug

U.S. PRT sales totaled $16.2 billion in Q2, more than doubling Q1 volume

U.S. pension risk transfer sales totaled $16.2 billion in the second quarter, more than doubling the volume from the previous quarter, a LIMRA survey found. The total volume in the second quarter also exceeded the volume during the same period last year by 31%, according to the survey. The increase in buyout volume from $12.3 billion in the second quarter of 2022 was primarily due to a single transaction. On May 1, Dallas-based AT&T Inc. announced the third-largest U.S. buyout transaction in history,...

August 24, 2023
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