What Determines the Freezing of Defined-Benefit Pension Schemes: Evidence from the UK

2021 ◽  
Author(s):  
Yuan Li ◽  
Wexi Liu ◽  
David Newton
Keyword(s):  
Defined Benefit ◽  
Pension Schemes ◽  
The Uk

Pension costs and liabilities for UK-regulated utilities

2011 ◽  
Vol 11 (1) ◽  
pp. 89-117
Author(s):  
GORDON HUGHES
Keyword(s):  
Defined Benefit ◽  
Present Value ◽  
Real Rate ◽  
Goods And Services ◽  
Pension Schemes ◽  
Pension Costs ◽  
The Uk ◽  
The Cost ◽  
Pension Liabilities ◽  
Regulated Utilities

AbstractThis paper argues that a substantial portion of the risks associated with the defined benefit (DB) pension schemes operated by regulated utilities in the UK will, in practice, fall on customers via the tariffs that they pay for regulated goods and services. It examines the assumptions made by regulated companies in their FRS 17 valuations. These assumptions generate parameters that systematically understate both the present value of pension liabilities and current service costs. These are re-estimated using the risk-free real rate of discount and compatible assumptions. On this basis, the total pension deficit for the sample increased from £12.7 billion to £56.3 billion in 2009, equivalent to about 110% of regulated revenues. Further, the cost of current service for 2008–09 was 20% higher than total contributions in the year, despite large top-up contributions. If contributions were increased to cover current service costs and to eliminate pension deficits over a period of 10 years, the additional contributions would amount to 235% of actual contributions or 13% of regulated revenues implying a significant increase in regulated charges. Companies in the communications and transport sectors face the largest adjustments in addressing the problems of underfunded pension schemes.

Financial Management of the UK Pension Protection Fund

2013 ◽  
Vol 18 (2) ◽  
pp. 345-393 ◽  
Author(s):  
J-P. Charmaille ◽  
M.G. Clarke ◽  
J. Harding ◽  
C. Hildebrand ◽  
I.W. Mckinlay ◽  
...  
Keyword(s):  
Risk Management ◽  
Financial Management ◽  
Enterprise Risk Management ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Corporate Sponsor ◽  
Stakeholder Groups ◽  
Pension Schemes ◽  
Enterprise Risk ◽  
The Uk

AbstractThe UK Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of UK private sector defined benefit pension schemes which have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. This paper discusses the application of Enterprise Risk Management principles and techniques to the unique situation of the PPF. The elements of the financial management of the Fund have been developed by reference to practice within proprietary insurance institutions and within pension funds. The paper will be of interest and, we hope, of some value to students, researchers and analysts and also to the PPF's own stakeholder groups that have a stake in an effective pension protection regime.

scholarly journals Who wins? Evaluating the impact of UK public sector pension scheme reforms

2016 ◽  
Vol 237 ◽  
pp. R38-R46 ◽  
Author(s):  
Alexander M. Danzer ◽  
Peter Dolton ◽  
Chiara Rosazza Bondibene
Keyword(s):  
Public Sector ◽  
Local Government ◽  
Civil Service ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Level Of Education ◽  
Fire Services ◽  
Pension Schemes ◽  
The Uk ◽  
The Impact

Radical changes have been implemented to pension schemes across the UK public sector from April 2015. This paper simulates how these changes will affect the lifetime pension and how the negotiated pension changes compare across six public sector schemes by level of education. Specifically, we simulate the occupation specific Defined Benefit (DB) pension wealth accumulated for a representative employee over the lifecycle by factoring in the recent changes to pension conditions. We find that less educated workers with low or moderate earnings in the NHS, Local Government and Civil Service schemes are the winners having secured an increase in the value of their pension of between 10–20 per cent. Graduate workers with faster wage growth in the Civil Service, Teachers and Local Government schemes lose between 3 per cent and 5 per cent. This is in sharp contrast with the Police and Fire services who have lost around 40 per cent irrespective of their education.

scholarly journals Economic capital for defined benefit pension schemes: An application to the UK Universities Superannuation Scheme

2012 ◽  
Vol 11 (4) ◽  
pp. 471-499 ◽  
Author(s):  
BRUCE T PORTEOUS ◽  
PRADIP TAPADAR ◽  
WEI YANG
Keyword(s):  
European Commission ◽  
Capital Requirements ◽  
Economic Capital ◽  
Green Paper ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Pension Schemes ◽  
The Future ◽  
Regulatory Regimes ◽  
The Uk

AbstractThis article considers the amount of economic capital that defined benefit (DB) pension schemes potentially need to cover the risks they are running. A real open scheme, the Universities Superannuation Scheme, is modelled and used to illustrate our results and, as expected, economic capital requirements are large. We discuss the appropriateness of these results and what they mean for the DB pension scheme industry and their sponsors. The article is particularly pertinent following the recent European Commission Green Paper on the future of European pensions systems, its call for advice on reviewing the Institutions for Occupational Retirement Provision Directive and the introduction of the Basel 2 and Solvency 2 risk-based regulatory regimes for banking and insurance, respectively.

scholarly journals The cult of the equity for pension funds: should it get the boot?

2005 ◽  
Vol 4 (1) ◽  
pp. 57-85 ◽  
Author(s):  
CHARLES SUTCLIFFE
Keyword(s):  
Asset Allocation ◽  
Risk Sharing ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Turn Of The Millennium ◽  
Equity Prices ◽  
Risk Return ◽  
History Of ◽  
Complete Rejection ◽  
The Uk

Over the last half century UK defined benefit pension schemes have followed the cult of the equity by investing a large proportion of their assets in equities. However, since the turn of the millennium this cult has faced two serious challenges – the halving of equity prices, and the complete rejection of equity investment by the Boots pension scheme in 2001. This paper summarises the history of the cult in the UK and the arguments advanced at the time to support its adoption. It then presents the case for the cult (excluding taxation, risk sharing and default insurance). This is followed by a detailed consideration of the validity of this case, including an examination of the relevant empirical evidence. It is concluded that, in the absence of taxation, risk sharing and default insurance, the asset allocation is indeterminate; and depends on the risk-return preferences adopted by the trustees.

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