Correspondence: Con Keating, BrightonRock Group, 18 Elmfield Road, London E4 7HU, UK. E-mail: Con.Keating@BrightonRockGroup.co.uk

¹is best known for his quantitative work in investment performance measurement and forecasting with techniques such as the Omega function and metrics, he has also been involved with pensions as a fund manager and trustee since the early 1970s, when he managed the NATO provident fund. His professional career included periods as an analyst with INA on P&C and large risk insurance and subsequently CIGNA in life, pensions and health care. He is a member of the steering committees of the Finance Research Institute and Financial Econometrics Research Centre at the University of Warwick, a member of the Societe Universitaire Europeene de Recherche en Finance and of the American Finance Association. He is currently an advisor for the OECD's working party on private pensions and to the World Bank.

Received 19 January 2009; Revised 19 January 2009.

Abstract

This paper is concerned with the financing of companies and funding of employment-based defined benefit (DB) pension schemes and takes the viewpoint of a UK-based financial analyst, while abstracting from certain institutional detail of minor relevance. This view carries with it consequence for the design of work-based pension regulation, and the implications of that in the broader economic context. It draws extensively on analysis conducted in the research and development activities of BrightonRock Group. In particular, it illustrates the use of optimally designed pension indemnity assurance to maintain complete member security while, through capitalising the sponsor covenant, reducing the costs and risks of DB pension provision to a sponsor.