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Pensions Corp sets up DB cover for longevity

The Pensions Corporation is offering an insurance product to protect companies’ defined-benefit pension funds against longevity risk.

The product, from the Pension Insurance Corporation, insures scheme members for whole of life. Pension funds will pay guaranteed annual premiums for insurance that will reimburse them for the cost of any future pension payments arising from people living longer than expected. The firm stresses the insurance is not offering an index-linked derivative instrument-like products offered by competitors.

The Pension Corporation consulted with advisers, trustees and corporate sponsors and Pension Corporation partner and Pension Insurance Corporation director John Fitzpatrick says the feedback was extremely positive.

He says firms have been looking for a way to protect members’ benefits and guard against the cost of paying out for longer.

He says: “Life expectancy increases one year every five years, which amounts to a 70 basis point rise each year. Companies prefer insurance policies over derivative options because they are less risky and cover them if their pensioners live longer instead of being based on the population at large.”

The policy is primarily designed for big pension funds with no plans for an immediate buyout that want to retain 100 per cent of their assets in the fund.


Easy come, easy go

Volatility and periods of pronounced weakness have marked European equity markets following four years of strong gains. Banks were initially at the epicentre of these market moves but concerns about the economic outlook have begun to affect the wider market. We think that the root causes of this volatility – a higher risk premium and softer growth – are here to stay for the foreseeable future.

Estate agents claim market is stabilising

The National Association of Estate Agents says members are seeing signs of stability in some areas of the housing market, including sales agreed, the number of viewings before a sale is secured and the average difference between asking and sales price.

Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.


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