We can help companies understand the current pension risks that they are exposed to. These risks can include:
- Investment risk;
- Interest rate risk;
- Inflation risk;
- Longevity risk; and
- Operational risk.
Once a pension risk profile is established, we assist companies is selecting the most appropriate approach for managing pension risk. These options can include changing investment strategy, conducting enhanced transfer value exercises, longevity swaps, buy-out/buy-in and innovative funding solutions.
One of the most rapidly developing fields related to pensions is an increasingly wide range of options to manage and reduce the risk associated with providing pension benefits. The emergence of new life assurers and investment banks willing to take on pension risk has introduced a wide diversity of approaches that can be adopted. Performing a Value at Risk exercise can analyse the balance between cost and risk mitigation, and assist decisions on how a company’s risk budget should be spent:
This will ensure that decisions about pension risks are taken in a way that complements the company’s overall risk appetite and financial strategy.
The Pensions Roadmap
A significant pension risk is that of missing chances to capitalise on risk management opportunities - an example being the opportunity to de-risk asset strategies prior to the credit crunch. We recommend that companies consider developing a Pensions Roadmap – a dynamic framework to ensure they are in a position to implement options in the future and capitalise on future options at the right time. A Pensions Roadmap would include details of the:
- Current risk exposure;
- Risk management objectives;
- Current risk management strategy;
- Monitoring arrangements;
- Trigger points for implementing risk management options; and
- Strategy for reviewing new risk options to the market.
We have strong relationships with many of the providers of risk management options and we can work with them to tailor bespoke products to meet the risk management needs of your company. We also have in-house investment experts who can analyse the current investment strategy of a company and the investment market to create a dynamic investment strategy that matches the liabilities and responds appropriately to changes in market conditions.
Additionally, we are able to provide assurance services for pension schemes which include understanding of your risk and control environment in this area and testing of the relevant systems and processes. These services can be provided jointly with existing internal audit resources or as an outsourced solution. Learn more about the extent and benefits of our pension assurance services.