Pension trustees to adopt swaps, forecasts L&G

Swaps are essentially an easy way for pension funds to exchange excessive cash flow from current investments for fixed income in future, when pension benefits must be paid, says L&G financial economist Andrew Clare. ”It’s like swapping to a fixed rate mortgage from a variable rate mortgage,” he says. A major benefit of swaps is they enable pension funds to swap the fixed cash flow from the current bond portfolio for cash flows related to RPI flows. This is particularly important because research suggests up to 80% of scheme liabilities can be retail price index related, according ...