84% of pension schemes opt for investment strategy de-risking options

A large majority, 84 per cent, of pension schemes are now focusing on their investment strategy to grow scheme assets, KGC has found.

According to KGC Associates’ 8th Actuarial Survey, 84 per cent of respondents said they were looking at their investment strategy to de-risk and 11 per cent were focusing on liability management.

This year’s results indicate a shift to investment strategy focus from last year where 59 per cent of respondents focused on this and 41 per cent opted for liability management.

The survey also questioned participants on how many trustee meeting they offer in a non-valuation year and the associated cost. As predicted the larger schemes offered more meetings of around four a year while smaller schemes offered two meetings with a lower cost of up to £2,161. Larger schemes reported associated costs of £2,375 to £2,714.

Furthermore, when asked whether the weakening economy would have a negative impact on employers’ ability to de-risk funds, almost a third, 32 per cent, thought it would. However, almost half, 47 per cent, thought the economic environment would not have an effect.

In addition, the survey questioned: out of GDPR, Brexit, FCA/CMA Investigation, the pensions dashboard or other, what would have the biggest impact on schemes in the next 12 to 18 months. Forty two per cent of respondents said GDPR would have the biggest impact, followed by Brexit noted by 26 per cent of respondents. No respondents said that the pensions dashboard would have an impact.

Looking at actuarial plans for the next 12 to 18 months, the report concluded that the “focus appears to be on tactical rather than strategic thinking, including meeting GDPR requirements by 25 May 2018.

“With just over a year to go, it is surprising the two most significant events – Brexit and the dashboard, have yet to make any impact. We appreciate the uncertainty around Brexit and its consequences may mean it cannot yet be defined. Dashboard is a different matter. It is happening and it will influence on all UK pension schemes, including DB.
“Perhaps the actuarial fraternity is waiting on guidance from its professional body before talking to clients about how the value of their members’ pensions will be captured for the dashboard,” the report added.

KGC survey author Hayley Mudge, commented: “Rarely have we seen such a big swing in our survey responses. Given the anonymity of the participants, the opinion pieces and responses to the industry view questions are perhaps, the most telling part of the survey’s outcomes. The resource and costs involved in carrying out liability management exercises may be too much at a time when one respondent suggested pensions were facing the perfect storm of events.”

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