ERM for Pension Funds [34]

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Bullet points include: Model structure. Including asset volatility in model. Quantifying value split between sponsor and members. Illustrative DB Final Salary Scheme, closed to new accrual, no discretionary benefit increases, target funding level of 100%, deficits/surpluses versus target amortised 20% each year. Funding ‘valuation’ includes discount rate 1.2% pa higher than wind up valuation (equity risk premium – asset strategy 60% equities). See www.nematrian.com/EntityWideRiskManagementForPensionFunds.aspx and www.nematrian.com/WebServiceExampleSpreadsheets.aspx?s=PFProject. Priority on wind up Benefit value on wind up basis, assuming actual recovery (if sponsor defaults) is 100%. Market implied default rate: 2% pa 4% pa 6% pa 8% pa. Active* 2 (to deferred on wind up) 6619 6365 6163 6001. Deferred 2 18013 Pensioner / spouse 1 34259. * Active members benefit from salary inflation above price inflation, and hence receive higher eventual benefits the longer the scheme does not wind up

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