Briefly Noted for 2021-02-17
1 week ago
the discount rate used to value future pension liabilities should reflect the fact that pension funds are guaranteed, even if the return on a pension's investments are not. More formally, the discount rate applied to the liability should be based on the risk of the liability, not the risk of any assets used to fund any liability.. . . anyone in a DC or 401(k) plan who seeks to guarantee their pension via buying an annuity will find that the cost of buying a given income has risen; put another way, the same pension pot buys a smaller income. In short, the increased cost of providing pensions shows up everywhere but in the US public pension market. And that is just wrong."