Pension Funds

Pension Derisking - the best research and white papers

Many of our most popular pensions white papers are on the subject of de-risking.

Here are some of the best:

1. A Framework To Evaluate Pension De-Risking Strategies (Ernst & Young)

This paper from E&Y develops a common framework to define the pension risk reduction strategies currently employed. The report describes the tools, risk transfer techniques, investment strategies and insurance solutions that may be used by DB pensions plans. Practical demonstrations are given to show how, in practice, these solutions can be tailored to specific requirements.

2. The $260bn Pension Risk Transfer Market: Going Global (2015)

The market for pensions risk transfer is reaching beyond the UK; and is spreading around the world. By transferring longevity risk to insurers, pension plan sponsors can both strengthen their own financial stability and also improve the financial security of retirees. This 16 page report from Prudential discusses the global marketplace for longevity risk transfer, examining individual transactions and exploring the process for determining the optimal solution for an individual fund.

3. Reducing Pension Risk: Five Myths Holding Back US Plan Sponsors (Prudential)

Prudential believes that more US plan sponsors would benefit from adopting risk management solutions. Awareness is increasing, but practical implementation remains at a low level, particularly for risk transfer solutions. The authors analyse the reasons why more plans are not taking steps to reduce pension risk.

4. KPMG Survey of UK Liability-Driven Investing 2015

The UK continues to lead the world in pensions risk reduction, with over $1000bn of pensions liabilities now hedged. KPMG provide the numbers and describe the landscape for UK liability-driven investing in 2015.

5. De-risking opportunities for 2016: insurer capacity now over £15bn (LCP, Dec 2015)

This report by Lane Clark and Peacock is for senior decision makers - those responsible for managing the risks and costs associated with pension plans. It examines some of the key developments and opportunities for buy-ins, buy-outs and longevity swaps.

6. Global Pension Risk Survey - UK Findings December 2015 (Aon Hewitt)

This 32 page report by Aon Hewitt surveys the global landscape for the management of Pension Risk. The analysis reveals that the number of defined benefit plans implementing more robust pensions risk solutions continues to increase. In particular the proportion of small schemes using LDI or alternative asset classes is growing fast. More complex asset-liability strategies or longevity risk management for the time being remains the preserve of larger schemes, but the authors expect these differences to narrow over time. The survey also notes that a greater proprtion of large schemes are outsourcing selected functions.

7. Pension Risk Transfer – Evaluating Impact and Barriers for De-Risking Strategies (Society of Actuaries)

This paper develops a framework plan sponsors can use to assist in determining their “de-risking readiness”. The process is logically described in 3 steps: determining the potential choices; selecting the method of derisking; and then efficiently implementing it.

8. Practical De-Risking: Low Volatility Strategies (PH&N)

Typically, interest rate risk and longevity risk are the main focus of de-risking strategies. This paper suggests an alternative method of derisking; focusing more on the assets themselves than the liabilities or the matching of assets to liabilities. Here the focus is on equity risk. The authors argue that moving from a traditional equity strategy to a low volatility equity strategy will contribute to a significant derisking.

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