Timing is everything
This paper considers the difficulties preventing pension schemes from taking advantage of de-risking opportunities. The traditional methods of assessing and monitoring opportunities are compared with more timely and efficient mechanisms that can now be provided ensuring that temporary opportunities in the buy-out market are not missed.
More timely and efficient mechanisms can now be provided ensuring that opportunities in the buy-out market are not missed
- Executive summary
Many trustees and sponsors of pension schemes perceive the long-term goal of pensions management to move risk to an insurance company either through a full buy-out or, increasingly, through a buy-in.
- The traditional approach
When analysing whether a buy-in offers value-for-money, pension schemes need to assess and compare two variables...
- A more sophisticated approach
But there is a solution. PensionsFirst's unique business intelligence platform, PFaroe, allows schemes to achieve their aims in insuring liabilities by reducing or removing the inefficiencies of traditional methods.
- The case of Scheme ABC
To highlight the value that can be derived from more accurate and timely information on buy-out prices and scheme funding positions, this paper considers the case of a typical scheme (which will be referred to as Scheme ABC).
- Outcome using traditional valuation methods
If the scheme had followed a traditional method of tracking buy-in prices on a monthly basis - by using a consultant's buy-out index - it can be seen that a buy-in would have been perceived as being too expensive.
- Outcome using PFaroe
However, using daily valuations made possible by PFaroe, Scheme ABC would have in fact become aware that there were several dates at which the buy-in index appears very close to Scheme Funding liabilities.
- Alternative traditional approach - obtaining prices
directly from the market
The analysis has not, to this point, considered the alternative traditional approach of obtaining prices directly from the market. Under this method, there is no clear indication as to when to approach the insurers for quotes.
This paper highlights how the use of PFaroe, a detailed pension analytics platforms, enables schemes to achieve their buy-in/buy-out goals efficiently and effectively.
Fiona Page talks to the Pensions Management Institute about the challenges of effective DB pension risk management today.
The on-boarding period for a typical PensionsFirst Analytics customer would take 4-8 weeks but it...