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Economic capital for defined benefit pension schemes: An application to the UK Universities Superannuation Scheme

Porteous, Bruce, Tapadar, Pradip, Yang, Wei (2012) Economic capital for defined benefit pension schemes: An application to the UK Universities Superannuation Scheme. Journal of Pension Economics and Finance, 11 (4). pp. 471-499. ISSN 1474-7472. (doi:10.1017/S1474747212000029) (KAR id:31973)

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http://dx.doi.org/10.1017/S1474747212000029

Abstract

This article considers the amount of economic capital that defined benefit (DB) pension schemes potentially need to cover the risks they are running. A real open scheme, the Universities Superannuation Scheme, is modelled and used to illustrate our results and, as expected, economic capital requirements are large. We discuss the appropriateness of these results and what they mean for the DB pension scheme industry and their sponsors. The article is particularly pertinent following the recent European Commission Green Paper on the future of European pensions systems, its call for advice on reviewing the Institutions for Occupational Retirement Provision Directive and the introduction of the Basel 2 and Solvency 2 risk-based regulatory regimes for banking and insurance, respectively.

Item Type: Article
DOI/Identification number: 10.1017/S1474747212000029
Uncontrolled keywords: Defined benefit pension scheme, economic capital, solvency, stochastic modelling, asset–liability management.
Subjects: Q Science > QA Mathematics (inc Computing science)
Divisions: Divisions > Division of Computing, Engineering and Mathematical Sciences > School of Mathematics, Statistics and Actuarial Science
Depositing User: Pradip Tapadar
Date Deposited: 25 Oct 2012 13:43 UTC
Last Modified: 16 Nov 2021 10:09 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/31973 (The current URI for this page, for reference purposes)
Tapadar, Pradip: https://orcid.org/0000-0003-0435-0860
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