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Financial Risks and the Pension Protection Fund:Can It Survive Them?

Author

Listed:
  • David Blake

    (city University London)

  • John Cotter

    (University College Dublin, Ireland)

  • Kevin Dowd

    (The University of Nottingham, UK)

Abstract

This paper discusses the financial risks faced by the UK Pension Protection Fund (PPF) and what, if anything, it can do about them. It draws lessons from the regulatory regimes under which other financial institutions, such as banks and insurance companies, operate and asks why pension funds are treated differently. It also reviews the experience with other government-sponsored insurance schemes, such as the US Pension Benefit Guaranty Corporation, upon which the PPF is modelled. We conclude that the PPF will live under the permanent risk of insolvency as a consequence of the moral hazard, adverse selection, and, especially, systemic risks that it faces.

Suggested Citation

  • David Blake & John Cotter & Kevin Dowd, 2011. "Financial Risks and the Pension Protection Fund:Can It Survive Them?," Working Papers 200615, Geary Institute, University College Dublin.
    • Handle: RePEc:ucd:wpaper:2006/15
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    References listed on IDEAS

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    1. Langetieg, T. C. & Findlay, M. C. & da Motta, L. F. J., 1982. "Multiperiod Pension Plans and ERISA," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(4), pages 603-631, November.
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    9. Kevin Dowd & David Blake, 2006. "After VaR: The Theory, Estimation, and Insurance Applications of Quantile‐Based Risk Measures," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(2), pages 193-229, June.
    10. Treynor, Jack L, 1977. "The Principles of Corporate Pension Finance," Journal of Finance, American Finance Association, vol. 32(2), pages 627-638, May.
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    Cited by:

    1. Platanakis, Emmanouil & Sutcliffe, Charles, 2016. "Pension scheme redesign and wealth redistribution between the members and sponsor: The USS rule change in October 2011," Insurance: Mathematics and Economics, Elsevier, vol. 69(C), pages 14-28.
    2. John Cotter & David Blake & Kevin Dowd, 2012. "What Should Be Done About The Underfunding of Defined Benefit Pension Schemes?," Working Papers 201202, Geary Institute, University College Dublin.

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    More about this item

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G0 - Financial Economics - - General

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