PensionsFirst tackles defined benefit

Claiming to offer a “groundbreaking new approach to managing
longevity exposure and market volatility risks for defined benefit
[DB] pension schemes”, PensionsFirst opened its doors for business
in London in November. Chaired by Amelia Fawcett, former vice
chairman and COO of US investment bank Morgan Stanley’s European
operations, PensionsFirst’s approach rests on a range of analytical
and investment products for which it has filed a patent

PensionsFirst explained that its proprietary risk management
platform enables it to separately analyse each of the risks a DB
scheme faces such as longevity, inflation and investment market
risks, down to the individual member level, and remove those
exposures it does not wish to manage, while retaining those with
which it is comfortable and for which it wishes to retain the
upside potential.

This, continued PensionsFirst, enables it to issue longevity bonds,
tailored to each scheme’s individual liabilities. The impact of
this solution for DB schemes, said PensionsFirst, will be:

·    the availability of cost effective, scheme-specific
investment solutions; and

·    access to a new source of scaleable
  capital; and

·    complete immunisation of all risks.

“Our entry into the market is set to revolutionise the way risk is
managed in the global DB industry,” said Fawcett. “Our initiative
introduces scaleable debt capital to the DB market for the first
time, providing flexibility and cost efficiency to the management
of DB risk.”

The most comprehensive of a number of investment products offered
by PensionsFirst is its Blue Bond, which pays cash flows that match
the liabilities of the scheme to its members. The bond, while
“economically equivalent” to a DB scheme buyout, differs from
insurance buyout solutions, as it is designed to be held as a
scheme asset under the control of its existing trustees, said

Once a scheme has bought a Blue Bond and the scheme data and rules
are on its administrative platform, PensionsFirst said, it is then
very easy to price additional tranches related to benefits,
accruals or increased compensation. PensionsFirst added that while
the Blue Bond is primarily designed for use by ongoing schemes, if
required it could also be structured to provide a full buyout
solution for a closed scheme from which the sponsor wishes to be

Fawcett stressed that PensionsFirst’s solution would have global
appeal and that the company was in the process of establishing an
international distribution network in conjunction with a series of
major strategic partners.