SOLVING THE PENSIONS CONUNDRUM

Many thanks to Bloomberg Intelligence for hosting their conference ‘Solving the Corporate Pension Conundrum’ yesterday. We met a few new faces amongst some old friends and the talks and conversations were thought provoking.

It is becoming increasing evident that marking-to-the-gilt-market is all very well as a point of reference but must be viewed in the broader market context. One slide from the engaging Jon Hatchett showed the relative decline since QE in gilt yields (staggering) and other credit markets (broadly flat) and shouts at alternatives to deflate the pensions deficit balloon.

John Towner gave a lively insight into how insurers’ use their expertise (and increasing innovation and flexibility) to take advantage of this by sourcing and building bespoke credit and infrastructure portfolios. This is good news for pension schemes, although with the annual insurance market capacity quoted at £10bn-£15bn last night it will take us nowhere fast.

We have been working with insurers to design credit and infrastructure portfolios to match annuities and can attest to the significantly higher yields that might make the myopic gilt-yield-gazer googly-eyed.

This approach is bringing down buyout premiums and, by adopting the same approach within a pension scheme, self-sufficiency is far more affordable than many scheme sponsors and trustees realise.

Please visit our website and contact us if you are interested in hearing more #financialcanvas #takecontrol