“Bank of England to stress test risks in non-bank financial markets” (link)
Phew! Now we can all relax as the Bank looks at a risk that came to its attention. Hope it is also looking for risks that haven’t yet come to its attention!
Dodgy Dealing?
Lovely article “Baroness Bowles questions UKEB over “true and fair” assessment” by Cintia Cheong in today’s Guy Fawkes special edition of Insurance ERM. In essence, the good baroness accuses the UK’s accounting standard Endorsement Board (UKEB) of dodgy dealing.
A new euphemism
Insurance news. Legal & General today announced that it has completed a £530 million buy-in for the Siemens Benefits Scheme, a pension fund of the international company.
Superfunds
There were a few reports out over the weekend, e.g. here, about the The Pensions Regulator’s new interim guidance on superfunds.
The sheer lack of detail here is breathtaking. No formula, no apparent regime for internal model approval, no regulatory returns. Of course, they will “need to be comfortable that the investment and risk models superfunds intend to use are appropriate, robust and capable of accurately measuring and monitoring risks that the scheme is exposed to”, but no further details given yet.
The requirement to demonstrate “expected returns for various asset classes, attributable to the scheme and in the capital buffer” is ominous, but what else did you expect?
Defined confusion pension
A thought experiment. You have a defined benefit pension with a company scheme that backs its pension liability to you with various assets ranging from ultra safe to ultra high yielding. The liability is valued using the rate of return on the assets.
The company offers to buy you out, and will pay you the market value of those assets in return. (Perhaps assume it actually gives you those assets).
Co-op unloading part of £8bn pension scheme
Reported here. Co-op is planning two separate £1bn deals with PIC and Aviva respectively. The article implies they are buy-ins (i.e. a reinsurance arrangement where the pension liabilities remain on the scheme’s balance sheet).
“Aviva, PIC and the Co-op all declined to comment.”
Not dysfunctional at all!
Mick Lynch (assistant general secretary, National Union of Rail, Maritime and Transport Workers) also appears on the Radio 4 interview yesterday with John Ralfe. Starts around 20:30. There is no problem, according to Lynch.
Well it’s no surprise to me that in the New Year with a new Tory government we get an advocate of closing final salary schemes, advocating that there should be reform and verging on closing them. The scheme is not in trouble the way it’s been described [by Ralfe].
The most dysfunctional pension scheme
An interview on Radio 4 with our friend John Ralfe. Here at about 18 minutes through. Begins “the railway pensions scheme is about the most dysfunctional pension scheme that I’ve looked at over the course of the last 20 years”.
Matching adjustment on trial
This Friday I will be attending the Second Court Hearing on the Part VII proposal to transfer the long-term business of Equitable Life of Equitable Life Assurance Society, of which I am a policyholder, to Utmost Life and Pensions Limited.
I will be arguing that the Part VII transfer be blocked on the grounds that Utmost is financially much weaker than ELAS, because ULP’s balance sheet is propped up by £97m in non-existent capital created by an unsound practice called Matching adjustment.
If you are a regular reader you will be familiar with many of the arguments I will give, but the hearing is public so you may be interested in hearing them afresh, and seeing how the Court deals with them.
The hearing is on Friday 22 November 2019 at the Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London, EC4A 1NL. Anyone is entitled to attend. The room location will be published on Thursday 21st.
A sure way to make money
Kevin just spotted an excellent piece by our friend David Miles (ex MPC at the Bank) on the valuation of pension liabilities.