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Financial Management of the UK Pension Protection Fund

Published online by Cambridge University Press:  23 January 2013

J-P. Charmaille ,
M.G. Clarke ,
J. Harding ,
C. Hildebrand ,
I.W. Mckinlay ,
S.R. Rice  and
P. Reynolds
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Abstract

The UK Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of UK private sector defined benefit pension schemes which have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. This paper discusses the application of Enterprise Risk Management principles and techniques to the unique situation of the PPF. The elements of the financial management of the Fund have been developed by reference to practice within proprietary insurance institutions and within pension funds. The paper will be of interest and, we hope, of some value to students, researchers and analysts and also to the PPF's own stakeholder groups that have a stake in an effective pension protection regime.

Keywords

Pension Protection Fund (PPF)Enterprise Risk ManagementFunding ObjectiveSelf-SufficiencyTail RiskRisk MeasuresAnnuitiesCredit Risk InsuranceSolvency IIAsset-Liability ManagementLiability Driven InvestmentLong-Term Risk Model (LTRM)New Levy Framework (NLF)Economic CapitalHedgingReplicating PortfolioRisk DiversificationRisk Budget
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 18 , Issue 2 , July 2013 , pp. 345 - 393
Copyright
Copyright © Institute and Faculty of Actuaries 2013 

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