Switch to gilt-based funding may harm schemes by 30%

Pension schemes are considering a shift towards gilt-based scheme-specific funding valuations, accor...

Pension schemes are considering a shift towards gilt-based scheme-specific funding valuations, according to Hewitt Associates. The consultant's survey of 50 schemes revealed they were all considering a move to gilt-based rather than corporate bond-based funding as credit spreads widen, in a bid to ensure their calculations were sufficiently prudent. Hewitt Associates principal consultant Russell Agius says: "Our calculations show that differences between funding levels based on corporate bonds and those founded on gilt-based measures can be as much as 30% in the current environment. "...