With financial markets digging below the surface of pension plan management and assessing organisations based on the financial risks that exist in their pension plan, it is important to understand how the level of pension risk associated with your plan compares with that of your peers.

The Pension Risk Benchmark gives a snapshot assessment of the risk that a company faces as result of its pension plan exposures – looking both at the balance sheet vulnerability, and the potential impact on its earnings stream. These are part of a broader package of pension risk measures which are summarised in the Pension Risk Benchmark – a collection of ten different risk measures on a client specific basis, benchmarked against the overall market.

The detailed analysis remains confidential to your organisation, but you are benchmarked against a chosen comparator group.

Balance Sheet Vulnerability measures the plan’s “value at risk” as a proportion of market capitalization. Value at risk is the fall in funded status caused by a “one year in twenty” bad event.

Earnings Vulnerability is the annual contribution after a “one year in twenty” bad event, expressed as a proportion of earnings. The contribution takes into account the cost of current benefits as well as dealing with the amortization of any resulting pension deficit over seven years.

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