BOE & Pensions Collapse?

trevjl

my advice is to top watching the MSM news, especially the BBC

DaveMcG

At first I thought "what were they doing?" about this issue. But when you consider that the liabilities of pension funds go down so much when interest rates go up - (e.g. look at the cost falling massively on the open market to buy a bulk annuity to cover payments to pensioners) - it makes sense to get involved in this kind of hedging, because the alternative is to move between positions of being badly underfunded and then hugely overfunded as the interest rate cycle plays out.

I suppose it might have been overdone to some extent, but the principle seems sound.

xylophone

I’m 59, with my USS pension

Mentioned in article below.

https://www.dailymail.co.uk/news/article-11317867/Growing-fears-Gordon-Browns-pensions-timebomb-finally-explode.html

xylophone

Thanks, just checked and she is entitled to £145 per week and I am entitled to £185 it looks like.

What exactly does each forecast say?

daveshep26

xylophone said:

I’m 59, with my USS pension

Mentioned in article below.

https://www.dailymail.co.uk/news/article-11317867/Growing-fears-Gordon-Browns-pensions-timebomb-finally-explode.html

That looks like a lazy, mashed-up article (who'd have thought from Mail Online) - https://www.uss.co.uk/news-and-views/latest-news/2022/10/10102022_uss-statement-in-response-to-recent-media-coverage-on-ldi-strategies ; - but at least we're reminded it's all Gordon Brown's fault

USS claim they knew all about this, were tracking, were not a 'forced seller' at all and have turned this into positive opportunity (actively acquiring at "good prices" in recent weeks);

USS has other deficit (& stakeholder) issues- but not liquidity recently and right now

[Deleted User]

DaveMcG said:

At first I thought "what were they doing?" about this issue. But when you consider that the liabilities of pension funds go down so much when interest rates go up - (e.g. look at the cost falling massively on the open market to buy a bulk annuity to cover payments to pensioners) - it makes sense to get involved in this kind of hedging, because the alternative is to move between positions of being badly underfunded and then hugely overfunded as the interest rate cycle plays out.

I suppose it might have been overdone to some extent, but the principle seems sound.

Apparently DB pensions in the US and Canada did not use these derivatives.  The choice was there; British companies made the wrong one.

In my mind, change in interest rates shouldn’t impact DB pension funds.  They have a pool of clients, a good handle on size and duration of liabilities and they need to match these by taking out bonds. If interest rates rise then both liabilities and assets drop but its irrelevant as they still match. But I am just speculating. 

shortseller09

And the good news (10 days ago):

https://www.xpsgroup.com/news-views/press-releases/uk-pension-schemes-soar-surplus-gilt-yields-rise-following-chancellors-budget/