Is too much choice killing pension scheme decision-making?….
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Dianne Ramsay, UK Strategic Solutions
In 2013, the majority of UK pension schemes find themselves with a deficit hole to fill. Most UK pension scheme trustees and corporate sponsors are relying on investment returns and favourable market conditions to help them do this. But when is the right time to consolidate increases in the assets or falls in the liabilities? How do you do this? Focusing on a ‘set menu’ of key factors can help trustees avoid ‘à la carte’ indecision.
Introduction
Flight paths can help capture those times when the markets reward us. Improvements in funding levels can be monitored and acted upon in a timely manner through pre-specified de-risking mechanisms. Having such a trigger-based framework in place allows changes to be made to a scheme quickly and confidently.
So why haven’t more pension schemes embraced these types of solutions? In a recent survey, less than 50% of UK pension schemes had a flight path in place in 2012, although the majority intended to do so at some point in the future. Costs, difficulty and lack of necessary governance were all cited as reasons why they hadn’t implemented a flight path to date.
Such de-risking frameworks may not be perfect, but intuitively, having a de-risking plan in place must be more effective than having no plan at all.
Source: Schroders
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