The Society of Actuaries in Ireland has issued a statement welcoming the "sovereign annuities" initiative introduced in the Dáil last week.
This initiative will provide trustees of defined benefit pension schemes with new options that they can utilise to better manage the distribution of assets and risks between different categories of members. The extension of the proposal to include non-Irish sovereign bonds is particularly helpful in this regard. This opens up options such as the creation of “blended” annuity products and bond portfolios based on a mix of sovereign bonds. Given current sovereign bond market conditions, this is likely to lead to greater interest in the proposal in the near-term from pension scheme sponsors and trustees than might otherwise be the case.
However, the Society has highlighted that there are risks attached and trustees face difficult decisions as they consider whether and, if so, to what extent they should avail of sovereign annuities. The Society has called for appropriate risk management guidance and constraints to be incorporated as sovereign annuities now move through the implementation stage.