How we saved our client over £10m in the run up to RPI reform
The background
Announcements over 2019 suggested that the formula for RPI was to be changed from 2030 onwards. As with most pension schemes, our client used RPI-linked assets to hedge a portion of their CPI-linked liabilities. This presented a risk of RPI-linked assets falling in value, with no corresponding fall in CPI-linked liabilities.
Our solution
Using Visualise, our in-house platform for funding and investment analytics, we were able quantify the monetary impact of this risk with a click of a button. We set out our proposals to reshape the client’s hedging assets, to largely remove their exposure to RPI changes, whilst maintaining the same overall protection against rising inflation.
The outcome
Within two weeks, the trustees had reviewed our proposals and restructured their hedging portfolio. Our recommendations and support in the decision-making process allowed the Scheme to take decisive action, and led to a net funding gain of over £10m.
