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Risk reduction

Q

Quang

Member
The sponsoring employer is considering options to reduct risks from its DB pension scheme.

It knows a new valuation would result a lower deficit amount, given the current market conditions relative to that at the recent actuarial valuation date.

Would requesting a new formal valuation be considered a risk reduction option for the employer?

Thanks a lot.
Quang
 
It is only a risk reduction exercise if it reduces the uncertainty of outcomes. In this case, if the company knows that the valuation will result in a lower deficit, which risk will the valuation reduce?

I guess that it could reduce the risk of the Trustees requesting higher contributions.

Alternatively, a clearer picture of the funding level could improve the chances of good decisions being made - e.g. a more appropriate investment strategy. It could also reduce the risk of a surprise at the next valuation - for example, they may be wrong that there is now a lower deficit.
 
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