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Discount rate on UK define benefit pensions
Old 09-01-2016, 10:09 AM   #1
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Join Date: Feb 2006
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Discount rate on UK define benefit pensions

Here is an article from The Guardian about how UK DB pensions are valued. The usual discount rates used are UK Government bonds, or gilts, which have fallen from 1.3% to 0.6% on the 10 year gilt since BREXIT. There has been a trend in UK BD pensions to use Liability Driven Investing.....basically take no risk and try to match the contributions and assets to the future outgoings using gilts and high quality bonds. This has produced large deficits between assets and liabilities and employers now say they must make massive contributions to keep the pensions solvent. This is as stupid as using optimistic equity based numbers like 10%, but is useful to employers that might want to close a DB plan because it is seemingly untenable and replace it with a DC plan.
“So we beat on, boats against the current, borne back ceaselessly into the past.”

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