Financial Risks and the Pension Protection Fund: Can it Survive Them?

32 Pages Posted: 22 Jun 2007

See all articles by John Cotter

John Cotter

University College Dublin; UCLA Anderson School of Management

David P. Blake

City University London - Cass Business School

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: 2006

Abstract

This paper discusses the financial risks faced by the UK Pension Protection Fund (PPF) and what, if anything, it can do about them. It draws lessons from the regulatory regimes under which other financial institutions, such as banks and insurance companies, operate and asks why pension funds are treated differently. It also reviews the experience with other government-sponsored insurance schemes, such as the US Pension Benefit Guaranty Corporation, upon which the PPF is modelled. We conclude that the PPF will live under the permanent risk of insolvency as a consequence of the moral hazard, adverse selection, and, especially, systemic risks that it faces.

Suggested Citation

Cotter, John and Blake, David P. and Dowd, Kevin, Financial Risks and the Pension Protection Fund: Can it Survive Them? (2006). Available at SSRN: https://ssrn.com/abstract=993945 or http://dx.doi.org/10.2139/ssrn.993945

John Cotter

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

David P. Blake (Contact Author)

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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