The Value and Risk of Defined Contribution Pension Schemes: International Evidence

Using data on historical returns on international financial assets, the paper simulates pension fund and pension replacement ratios, building up frequency distributions of these ratios for individuals saving in a defined contribution pension plan in different countries. These frequency distributions illustrate the risk in the pension replacement ratio faced by an individual who saves in a typical defined contribution pension scheme.Risks, Defined contribution pension schemes, pension replacement ratio.

Annuity Prices, Money's Worth and Replacement Ratios: UK experience 1972 - 2002

In this paper we construct a time series of annuity prices from 1972-2002, and examine whether annuity rates are unfairly priced, and assess the extent to which annuitisation risks are hedged by stock market returns. We find no evidence that the average annuity rate is unfairly low. Depending on the assumptions about future longevity, the present value of an annuity (it's money's worth) is of the order of between 90 per cent and 100 per cent of the purchase price. Compared with the typical costs of buying financial services this figure looks suspiciously good. In addition, we find no reason to suggest that individuals are worse off by annuity rates being low, since this has been off-set by increases in the value of pension funds over the last thirty years. Even apart from the fact that people retiring today expect to live longer, their pension income (compared to their final salary) looks as good as ever.annuities, money's worth, replacement ratios

The Profitability of Block Trades in Auction and Dealer Markets

The paper compares the trading costs for institutional investors who are subject to liquidity shocks, of trading in auction and dealer markets. The batch auction restricts the institutions’ ability to exploit informational advantages because of competition between institutions when they simultaneously submit their orders. This competition lowers aggregate trading costs. In the dealership market, competition between traders is absent but trades occur in sequence so that private information is revealed by observing the flow of successive orders. This information revelation reduces trading costs in aggregate. We analyse the relative effects on profits of competition in one system and information revelation in the other and identify the circumstances under which dealership markets have lower trading costs than auction markets and vice versa.Market microstructure, Auction market, Dealer markets.

Performance Persistence of Pension Fund Managers

This paper examines persistence over time in the performance of fund managers responsible for making the investment decisions of UK pension funds. Previous work on UK pension funds found little evidence of fund manager persistence, but we argue that this may have been due to survivorship bias in the construction of these data samples, which may have disguised true persistence. Using a large sample of pension funds over the period 1983-97 in which there is less survivorship bias, we find strong evidence of persistence in abnormal returns generated by fund managers over one year time horizons.

(dme)MCl_3(NNPh_2) (dme= dimethoxyethane; M= Nb, Ta): A Versatile Synthon for [Ta═NNPh_2] Hydrazido(2-) Complexes

Complexes (dme)TaCl_3(NNPh_2) (1) and (dme)NbCl_3(NNPh_2) (2) (dme =1,2-dimethoxyethane) were synthesized from MCl5 and diphenylhydrazine via a Lewis-acid assisted dehydrohalogenation reaction. Monomeric 1 has been characterized by X-ray, IR, UV−vis, ^(1)H NMR, and ^(13)C NMR spectroscopy and contains a κ^(1)-bound hydrazido(2-) moiety. Unlike the corresponding imido derivatives, 1 is dark blue because of an LMCT that has been lowered in energy as a result of an N_(α)−N_(β) antibonding interaction that raises the highest occupied molecular orbital (HOMO). Reaction of 1 with a variety of neutral, mono- and dianionic ligands generates the corresponding ligated complexes retaining the κ^(1)-bound [Ta−NNPh_2] moiety

Executive Pay and Performance in the UK 1994-2002

This paper examines the relationship between executive cash compensation and company performance for a sample of large UK companies over the period 1994-2002. This relationship is examined against a background of a series of reports into corporate governance mechanisms in UK companies. We show that base pay compensation of UK executives has increased substantially over this period, and we provide evidence on the movement in the pay-performance sensitivity over time. We identify an asymmetric relationship between pay and performance: in years and for companies in which stock returns are relatively high, pay-performance elasticities are high, but we find that executive pay is less sensitive to performance in those cases when stock returns are low. This suggests that overall there is little relationship between pay and performance. We also explore the heterogeneity of the pay-performance relationship across firms, and find that board structure, firm size, industry and firm risk are all significant determinants of executive compensation.Executive compensation, pay and performance

Trading Costs of Institutional Investors in Auction and Dealer Markets

This paper compares the trading costs for institutional investors who are subject to liquidity shocks, of trading in auction and dealer markets. The batch auction restricts the institutions' ability to exploit informational advantages because of competition between institutions when they simultaneously submit their orders. This competition lowers aggregate trading costs. In the dealership market, competition between traders is absent but trades occur in sequence so that private information is revealed by observing the flow of successive orders. This information revelation reduces trading costs in aggregate. We analyse the relative e®ects on profits of competition in one system and information revelation in the other and identify the circumstances under which dealership markets have lower trading costs than auction markets and vice versa.

Return Persistence and Fund Flows in the Worst Performing Mutual Funds

We document that the observed persistence amongst the worst performing actively managed mutual funds is attributable to funds that have performed poorly both in the current and prior year. We demonstrate that this persistence results from an unwillingness of investors in these funds to respond to bad performance by withdrawing their capital. In contrast, funds that only performed poorly in the current year have a significantly larger (out)flow of funds/return sensitivity and consequently show no evidence of persistence in their returns.

Compulsory and voluntary annuities markets in the UK

Working paperThis paper describes the operation of both the compulsory pension annuity and voluntary annuity markets in the UK. The paper reports on the movement of UK annuity price quotes in the voluntary market from 1957-2009, and in the pension annuity market from 1994 to 2009, and examines whether annuities were fairly priced over this period. The paper computes the money’s worth of annuities, and finds that on average the money’s worth in the voluntary market over the sample period for 65-year old males has been a very high 98%. In the larger compulsory pension annuity over a shorter sample period we estimate that the money’s worth for 65-year old males has been 89%, and for 65-year old females has been a similar but slightly larger 90%. Taking into account load factors associated with annuity contracts and in comparison with other financial and insurance products this implies that annuities are fairly priced. However the value of the money’s worth is sensitive to the assumptions made about life expectancy, and we explain the assumptions made about the appropriate life tables to apply to annuitants in these annuity markets. There is some evidence that money’s worth has fallen since 2002. We discuss a number of factors that could have effected the fall in money’s worth, including: changes in insurance regulation; changes in industrial concentration; an insurance cycle; pricing of mortality uncertainty and the growth in the impaired lives market.Part of this work arose out of a project at the Department of Work and Pension