IAS 19 to speed pension de-risking
Proposed changes to accounting standards will remove some of the reporting freedom enjoyed by pension funds and could steer them away from investing in equities towards the relative safety of bonds and swaps – a development that could have an impact on the long-end of eurozone rate curves. Christopher Whittall reports
UK pension funds buy a lot of bonds. Together with insurers, the UK fund industry is reckoned to hold 35% of outstanding gilts issuance – which would add up to around £250 billion. This hunger for bonds is driven by tough domestic rules on accounting and solvency, which encourage long-dated liabilities to be matched with long-dated assets.
The picture across Europe has always been a little different. Now, proposed new accounting rules could encourage Europe’s pension funds to switch a greater
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