Liability Monitoring – 30 June 2017

August 10, 2017
| Ireland

The current edition deals with the position at 30 June 2017. To view our full update, please click the download link. The highlights for this issue of Liability Monitoring are:

  • Yields on Euro sovereign bonds fell slightly while corporate bond yields increased sharply over the quarter.
  • We estimate that pension accounting liabilities have decreased by around 6% since 31 December 2016 (for a sample scheme with 20 year duration) as a result of movements in discount rates. 
  • Annuity prices fell slightly over the quarter. This will lead to lower Funding Standard liabilities for most pension schemes.
  • The Settlement Premium decreased over the quarter and remains outside the range where we see settlement of liabilities as an attractive option.

Opportunity to manage liabilities

Despite the increase in corporate bond yields over the quarter, pension liabilities remain at elevated levels for companies with material DB pension plans and it is an appropriate time to consider the best approach for managing these liabilities. There are a range of solutions which can be adopted to offer greater flexibility to members and reduce pension costs.  In particular, a number of Irish PLCs have completed Enhanced Transfer Value (ETV) exercises.  These exercises allow companies to remove liabilities from their balance sheet at a cost which is lower than the accounting value of those liabilities.

If you would like to discuss these issues in more detail please contact your Willis Towers Watson Consultant or a member of our Corporate Consulting Team.