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Posts feedWhite Swans and the Moron Risk Premium
Interest rates and gilt yields are critical drivers of pension-scheme reserving and bulk-annuity pricing. However, many UK pension schemes self-insure when it comes to economic risks, with Liability Driven Investment (LDI) a common approach. This makes the turmoil in the UK Gilts market in Autumn 2022 of particular interest. Daily movements of 10-20 standard deviations arose as the
Sense and sensitivity
Annuities are a good example of the cornerstone of actuarial work: discounting future probabilities of payment to allow for the time value of money. Low interest rates have had major consequences for savers looking for income in retirement, but they are also one reason behind renewed actuarial focus on longevity in recent years.