The discount rate quandary

Our latest research report considers how most schemes set discount rates for pension scheme funding purposes.  In addition to the “gilts plus” method, it also considers two alternative methods which, in current market conditions, produce radically different results.  Using one of the alternative methods could potentially make deficits disappear.  The question is, should schemes be changing their approach and if so, what additional safeguards are necessary in light of the additional risk that adopting a lower funding target presents?

You can also see how much higher the discount rate for your scheme’s last valuation might have been had one of the two alternative models we consider in our report been used with our “discount rate quandary” calculation tool.