Schemes 'under-hedging interest rate risk'

Natasha Browne asks if schemes need to take further interest rate measures

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The majority of closed or frozen defined benefit (DB) pension schemes are significantly under-hedging their long-term interest rate risk at between 30%-40% when the ratio should be at least 70%, according to Aon Hewitt.

Senior partner John Belgrove says: "When a pension scheme hedges out some of its fixed interest rate liabilities, it effectively locks in a certain future rate. Many pension schemes have been holdi...

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