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IPE special report May 2018

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Moody’s sees UK schemes transferring liabilities

UK – Ratings firm Moody’s Investors Service says it expects public sector and occupational pension schemes in the UK to transfer liabilities via insurance or ‘mortality bonds’ in the next few years.

It noted that public sector and occupational schemes have estimated annuitant liabilities of £580bn (E839.7bn) and £762bn respectively.

“Moody’s anticipates that over the next few years many pension schemes will seek to transfer this risk, either into the insurance sector using bulk annuity buyouts or to the capital markets using ‘mortality bonds’,” Moody’s stated in a report on the life industry.

For that industry, there remained a “number of inherent demographic problems”. It said the ageing population that appears to be failing to provide sufficiently for retirement offers “good reward” to firms that can address those needs.

Meanwhile, further submissions to the consultation on Adair turner’s Pension Commission’s report have been released – from the National Association of Pension Funds, Mercer Human Resource Consulting and the Pension Policy Institute.

The NAPF said: “State pension provision must provide clarity and consistency at the heart of effective pension reform.” It proposed a Citizen’s Pensions.

Mercer pointed to housing costs mean first-time buyers in particular simply cannot afford to meet the required level of saving.

The PPI said some of the Turner report’s assumptions were “overly simplified”. And it said that opportunities to undertake new analysis had not been taken. It added that wider policy issues were not addressed.

The report was an “incomplete starting point”. And it doubted whether a practical system of compulsion could be designed.

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