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Pension fund risk management [11]

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Bullet points include: Pension protection schemes generally levy a premium for coverage If charged to IORP then all other things being equal will deplete tangible asset base of IORP increasing shortfalls in future Perhaps not a problem if PPS is sure to honour coverage. But: Introduces a cash-out risk as per a CPDO, e.g. if scheme runs out of assets does PPS stop coverage? And what does “runs out” mean here? If PPS ceases to provide cover at some point in the future then IORP’s exposure to its sponsor would be that much worse thereafter? Is the picture altered if the premium is paid directly by the sponsor?

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