UK companies are falling over themselves to offload their pension-plan liabilities to the insurance industry. The changes in investment strategies that are likely to accompany the shift have serious long-term implications for UK gilts and equities, removing a natural buyer for those assets from the markets.

So-called defined-benefit pension plans are a headache for the corporate sector. The promise to pay a lifetime income linked to retirees’ past earnings is hard to quantify, especially as the pledge carries some inflation protection. The accounting treatment of pensions introduces volatility into balance sheets: The liability calculation changes as bond yields and actuarial assumptions fluctuate, while assets backing the promises are recorded at current market values.

QOSHE - How Might the Next Gilt Crisis Start? Like This. - Chris Hughes
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How Might the Next Gilt Crisis Start? Like This.

10 14
01.03.2024

UK companies are falling over themselves to offload their pension-plan liabilities to the insurance industry. The changes in investment strategies that are likely to accompany the shift have........

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