October 2009
‘IASB drops plan to alter discount rate calculation’ Peter Black comments:
One problem with the proposal was a lack of clarity about exactly what proxy would replace government bonds. "The respondents felt it wasn't clear what that would involve," he said. Global Pensions Online, 22 October
Joanne Livingstone is quoted:
Tory pledge to reverse DB tax raid
Punter Southall technical director Joanne Livingstone said it was disappointing the Tories had 'climbed on the bandwagon' of attacking large public sector pension payments.
She said Osborne had not considered the restrictions already in force under the pensions tax system. She explained: "While it is true that there is no absolute cap on the amount of pension that a member can receive, the tax system is such that all the advantages of a pension are stripped away where the annual pension exceeds 87,500."
Livingstone added that imposing an additional cap on pensions would add another level of complexity to an already over-complex system.
"The continuing provision of public sector pensions is clearly an important issue in the current financial climate. It is important that this discussion should take place in an atmosphere of informed debate and not look to impose quick-fix solutions when the existing system already provides much of the necessary restraint." Professional Pensions, 7 October 2009Richard Jones is quoted, Buyouts a bad deal for 84% of schemes:
""A pension scheme would be able to run off the liabilities at a cost below the buyout price, adopting the same low-risk strategy an insurer would use."
However, Jones said buyout could be better value for smaller schemes which would be able to save on administration costs. He said: "A buyout can be attractive to remove the expense of operating a small scheme. Also, it could remove the longevity risk associated with smaller schemes, as in several cases those schemes do not have enough members to match the average longevity risk." The report also said some projections for growth in the buyout were "overly optimistic".
Jones said: "In the short term, we do not expect activity to pick up to any great extent. Total business volumes for 2008 were £8bn, but this figure was inflated by two exceptional and very large deals by Cable & Wireless and Thorn.
"Some insurers and other commentators have suggested the buyout market will see business levels of up to £8-10bn over 2009, but we consider these estimates to be optimistic. It is more likely total volumes will be around £3bn."
Jones said as the initial euphoria and temporary pricing discounts of up to 10% dissipated some insurers were beginning to struggle. Professional Pensions, 1 October 2009Martin Hunter is quoted:
But Martin Hunter, a consultant at Punter Southall Transaction Services, sounds a note of caution as consultants enthuse about longevity swaps. "The deals to date, and for the next year or two, will concentrate on just current pensioners, so it will not remove all longevity risk from a pension scheme." He says. "It will leave behind the more risky deferred pensioners and there is more uncertainty about how long they are going to live. Over the next two years, we expect the longevity swaps market will grow but it needs to overcome a number of obstacles." Employee Benefits, 1 October 2009
