Pensions - Articles - JLT DB pension funding update

 
 
 Charles Cowling, Director, JLT Employee Benefits, comments:

 “As we come ever closer to a “Grexit” from the Euro, the rattled financial markets certainly aren’t helping the funding position of pension schemes.

  

 “Total pension scheme deficits are slightly down on a month ago, but deficits are still significantly higher than a year ago. There are signs that pension schemes are increasingly implementing LDI solutions to hedge out interest rate and inflation risks – even though this means “locking in” to current yields. But with markets looking increasingly uncertain, companies and trustees are quite reasonably concluding that running significant risks on interest rates and inflation (and thereby betting against market prices) is a mug’s game which is best avoided.

  

 “Even if LDI solutions are increasingly reducing interest rate and inflation risks, companies and trustees are still in for a “white knuckle ride” in markets, as pension scheme deficits swing up and down with every twist and turn in the saga of Greece, its debts and the European currency union. Beware Greeks bearing gifts (or bailout proposals) seems to be the lesson being taken to heart by the EU – and possibly too by companies and trustees of DB pension schemes.”