GLOBAL - Risk aversion among banks and a weighty legal burden caused by the global credit crisis has severely hampered pension schemes abilities to use derivatives-based liability hedging, according to Watson Wyatt.
Collateral and termination clauses required by banks are also more penal, which is ironic considering that the firm claimed many pension funds had higher credit quality than banks.
The costs of insuring against bank default has increased six-fold during the past six months, which has deterred many banks from retaining unhedged risks on their balance sheets. Funds have therefore been forced to delay implementing these risk-reducing strategies.
Watson Wyatt said while there was persistent demand for Over-The-Counter (OTC) swaps, the delays as a result of ISDA documentation would likely hinder the wider adoption of these products.
The secretary of state for work and pensions has told MPs clawback and avoidance measures could be imposed for the people responsible for driving Carillion over the cliff.
Occupational pension provision has continued to grow in value, but there remains large variance in incomes across the pensioner age group, according to latest government data.
Defined benefit (DB) schemes could have an aggregate surplus by 2021 under Pension Protection Fund (PPF) projections, its strategic plan for 2018 to 2021 reveals.
Investment consultants are failing to recommend products that outperform net of fees, the Competition and Markets Authority (CMA) has said as its investigation into the market continues.