8.1 This chapter sets the methodology the PRA uses to inform the setting of a firm’s Pillar 2A capital requirement for pension obligation risk.
Definition and scope of application
8.2 Pension obligation risk is the risk:
• to a firm caused by its contractual or other liabilities to, or with respect to, a pension scheme (whether established for its employees or those of a related company or otherwise); and
• that a firm will make payments or other contributions to, or with respect to, a pension scheme because of a moral obligation or because the firm considers that it needs to do so for some other reason.
8.3 Pension obligation risk relates to defined benefit pension schemes and defined contribution schemes offering guaranteed returns that are not fully matched by underlying investments. Hybrid schemes are considered to be defined benefit pension schemes. Pension obligation risk includes the risk arising from overseas pension schemes.
8.4 A sponsoring firm is a firm with contractu
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