Saul Jacka on “Regulation, risk and (defined benefit) pensions”

Professor Saul Jacka


Published with the kind permission of the author.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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6 Responses to Saul Jacka on “Regulation, risk and (defined benefit) pensions”

  1. Peter Tompkins says:


    One word. That’s all I really need to say about this.

    Yes. The Equitable was a situation where regulation didn’t deliver as people expected. It was actually more about the Society’s distribution strategy which didn’t properly look at market risk.

    And here we have an author poo-pooing the regulator of pensions and the actuaries of today trying to protect pensioners by minimising the risk of mismatched assets. Fixed interest investments are the only possible match to fixed liabilities however the author of this presentation would prefer it not to be.

    What tPr is doing today is what the insurance regulators should have been doing with Equitable 25 years ago. Hurrah.

    • Julius Pursaill says:

      I don’t understand why you are blaming distribution strategy. Equitable chose not to hedge their GAR liabilities because they believed they could reduce the terminal bonus on policies with GARs to remove the benefits of the GAR. The HoL found, entirely reasonably, that this wasn’t an acceptable way to treat these policyholders- not least because by that stage it represented a gargantuan cross subsidy from GARs policyholders to everyone else.

      • Peter Tompkins says:

        If you read Penrose you will see the history of bonus declaration was a real issue (nothing to do with GARs). If they had taken more prudence they would have been able to ride out the GAR judgment.

        In effect Equitable was almost taking as given that equity outperformance would carry on regardless. It seems ironic that the presentation in this blog is based on the belief that equities must be better value than matching assets for pension schemes.

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  3. ConKeating says:

    Tosh Indeed. But I am referring to the comment above.
    Several years ago, I was commissioned by the Ministry of Finance of a major African country to examine the Equitable affair and draw policy recommendations for them. I recognise Saul Jacka’s description of the evolution of events, not the twaddle above.
    Peter appears to follow Trump in believing that if something is restated often enough it becomes true – it doesn’t.

  4. Bob Compton says:

    I thought Saul Jacka’s presentation was on the money! I was particularly delighted to see Fallacy #1 re “Lower volatility assets such as gilts are less risky” shown up for what it is. I have been arguing this for decades with those Actuaries following the dogma of gilts. There is a place for holding gilts in pension funds but not when the price is exorbitant or actually destroys value. Unfortunately TPR is in the latter camp, a camp that currently suits the Treasury, as rising demand from DB pension funds for gilts along with Quantative Easing suppresses real yields, and keeps the Governments borrowing costs artificially low. The losers are the shareholders of Companies still running DB schemes, and all those employees who no longer have access to an adequate pension in their latter years.

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