Presentation slides

By popular request, here are the slides from my presentation with the British-Swiss Chamber of Commerce today.

Liability Driven Investment

JPMorgan has a very interesting new survey of liability driven investment (LDI) across Europe (via epn). LDI uses characteristic parameters of scheme liabilities as benchmark and is therefore most relevant to DB and guaranteed return schemes (such as the Swiss).

The survey has the best coverage in the UK, the Netherlands and Denmark / Sweden (where the regulatory environment are rather similar). The survey looks into attitudes towards LDI, asset allocation impacts, the ongoing duration mismatch between liabilities (ca. 20 years) and assets (still below 10 years), derivatives strategies (mostly the usage of swaps) and funding levels with a significant difference between UK deficits (74% of schemes in deficit) and other countries' schemes mostly covered or in surplus.

Pensions accounting

This interesting overview article in epn discusses the current state of affairs and expected developments in accounting for pensions in US GAAP, UK GAAP and IFRS (changes to IAS 19), largely from the perspective of users of financial statements. As the proposal to revise IAS 19 is currently working its way through due process, it is expected that the revised standard should become effective in four years.

Turkey raises retirement age [TR]

In a commendable show of resolve, the Turkish Parliament overturned a presidential veto against its intention to raise the retirement age from 58/60 to 65 by 2048. This is seen as an important step to align retirement provision with the EU accession to which this important country strives for very resolutely. The investment provisions of the Pensions Directive appear to be quite another challenge to the Turkish pensions industry with its penchant towards government bond investments.

Europe Report 2006 [CH]

The Swiss Government has published its impatiently expected Europabericht 2006, an update to a similar analysis of the complex relations between Switzerland and the EU done last in 1999.

The Report mentions the Pensions Directive in several instances as a business opportunity not currently available to Swiss providers, or as a substantive vector for change in the non-mandatory segment of the second pillar in case it became applicable. In other parts of the report, the Directive is seen as related to a possible future Services Agreement, the negotiation of which has been adjourned in 2003. This policy stance evidently is detrimental to the interests of the Swiss pensions industry and therefore requires adjustments in several respects.