I think we always invest in inflation-indexed bonds unless the DBP pension plan is frozen. Correct?
if benefits arent indexed to inflation (non-COLA) then you would only use nominal bonds
not indexed to inflation (Non-COLA) = nominal
indexeed to inflation = real AND nominal
not indexed = nominal
wage growth = equities & nominal
wage inflation = real bonds & nominal
I always assume retiree benefits are not indexed to inflation unless the question specifically says so. So I generally say retiree benefits are hedged with nominal bonds, and the only time real return (inflation indexed, TIPS) bonds are used is when benefits are specifically said to be inflation adjusted.
Thanks. If there is any active participants in the plan, it needs to invest in Real Bonds.