A perfect storm during summer?

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As many are returning from or getting ready to enjoy their summer holiday, the DB pensions industry has been experiencing what many would consider to be a perfect storm.

In the last week or so we have witnessed painful daily drops in asset values. However, focussing just on assets misses half of the story.

Unfortunately, changes in the value of DB liabilities have been of the same order as asset movements and to the detriment of the funding position.

The true extent of the damage to funding levels is yet to emerge as it is not clear whether this is a temporary blip or longer term impact on funding levels.

What is clear is that the last few months represented a good opportunity to take some risk off of the table certainly when you compare to today's funding level.

So, what has actually happened to pension scheme funding levels recently?

Comparing to one month ago, the accounting deficit of UK pension schemes has increased 3-fold representing a 10% drop in funding levels.

The driving factors behind this have affected all liability bases not only has the accounting position deteriorated but the cost of buyout has increased as well.

So, how does a pension scheme weather this storm? Well, there are a great number of things that can be done…



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