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Conduct Risk and Financial Stability [16]

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Bullet points include: Defined benefit. Occupational schemes are often underfunded on a discontinuance (wind-up) basis, not helped by low interest rate environment / quantitative easing. Hence dependent on sponsor support (the “sponsor covenant”). Underpinned by industry-wide pension protection scheme (in UK, the PPF) which raises levies on solvent schemes to fund cost of sponsor defaults. Could sponsor defaults be so numerous (or affect so many large schemes) that a PPS runs into trouble and runs out of legal or practical levying powers? Defined contribution. Some trust-based occupational schemes, some insured arrangements. Underpins and protection arrangements more akin to those applicable to insurers. How robust are some insurers to low interest rates?

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