The Association of British Insurers has published a detailed report looking at the issues underlying the regulatory framework and the operation of defined benefit pension schemes in the UK.

Entitled “Coping with uncertainty and the importance of the sponsor’s covenant - the case of defined-benefit pension plans”, the report models a typical UK defined benefit pension plan and studies the impact of key sources of uncertainty affecting the financial health of the fund and its sponsor. In particular, the report explores the impact of alternative asset allocation strategies; underestimating life expectancy; a weakening in the scheme’s corporate sponsor, as well as different aspects of the institutional framework, including the frequency of top-up payments, the length of time needed for any recovery plan and a move to discount liabilities using the risk-free rate.

View the report (493KB)(pdf