Management of Default Risk in Pension Schemes

Bernard Ngwira, United-Kingdom

The recent worldwide downturn in the stock markets has demonstrated that periods of weak equity markets could lead to large pension fund deficits. In the US, the total pension deficit in the pension plans for the S&P 500 companies was 164.3 billion in 2004; whilst in 1999, before the stock market downturn, the S&P 500 companies had a total pension surplus of 280 billion. Furthermore, the PBGC reported a deficit of 22.8 billion for its single-employer program in 2005; whilst the same program had a historic surplus of 9.7 billion before the downturn in 2000. This descent into deficit was due to the fact that during the fiscal years 2001 to 2003 the total number of pension plans terminated by financially-distressed companies more than doubled compared to the fiscal years 1998 to 2000. These terminations lead to a thirty-fold increase in the total net claim amounts paid by the PBGC
Date: 30 May - Time: 8:30 to 10:00 - Room: 242B
Theme: 2.A. The responsibility of the actuary