Employee Benefits Review, November 2006

Is the current drive to liability-driven investment exacerbating pension deficits? In this issue of Employee Benefits Review, we examine this important trend and a range of other topical issues, as well as introducing a new flexible benefits solution.

Fuel To The Fire
Liability-driven Investment and the Pension Crisis
Article by Peter D. Maher

The increasing use of liability-driven investment has led to a greater use of bonds and gilts as a means to balance pension deficits. Peter Maher warns this could be a misguided strategy.

In its interpretation of The Pensions Act 2004, the Pensions Regulator has suggested that employers and trustees of pension schemes in deficit should organise a ten-year recovery programme. Not only is this a short timeframe for pension schemes, but the drive to match assets with liabilities means mitigation is almost impossible without significant cash injections.