Over the ten years to 2010, Defined Contribution (DC) schemes’ share of UK pension funds is estimated to have risen from 3% to 40%, amounting by the end of the decade to in excess of £500 billion. This has been largely at the expense of Defined Benefit (DB) schemes. Confronted by increasing longevity, a changing regulatory environment and weakening of sponsor covenants, the majority of DB schemes are now closed to new entrants.
The shift to DC can therefore be expected to continue, and have a significant impact on asset allocation decisions. According to a recent report by the EDHEC -Risk Institute and sponsored by AXA Investment Managers, DC pension schemes are "under-diversified" and need to adopt asset-liability management strategies to tackle inflation and longevity risks.
Proposals are sought to research the impact this move might have on the way assets are allocated in pension funds. The Institute & Faculty of Actuaries (IFoA) is concerned about how the change will impact on overall exposure to equities, bonds and other investment options, whilst the Investment Property Forum (IPF), European Public real Estate Association (EPRA) and Association of Real Estate Funds (AREF) are particularly concerned to ascertain what might be the results of the DB to DC shift in terms of exposure to commercial property.
The joint sponsors wish the study to focus on the following three inter-linked issues:
- The size of the current DC market; the decision-making process for the default option in DC schemes; existing (if any) allocations to real estate; and the role of investment consultants in determining asset allocations. This paper will feature a survey of representative UK DC schemes.
- Expected changes to the overall retirement planning and savings market in the UK, including the impact of demographic and regulatory changes on the schemes provided.
- Subject to the conclusions of 1) and 2) above, how real estate in its various forms can successfully be incorporated into DC and other pension schemes, or vehicles that can be used for retirement savings, particularly given the liquidity requirements of DC platform providers, and taking into account tax considerations.
If you have any questions or wish to discuss any aspect of our funding for member-led research please contact the Research and Knowledge Team:
Filter or search events
As part of the ARC Webinar Series 2021, this webinar will review the work of the UEA/Aviva research team over the last four years on a major research programme funded by the IFoA’s Actuarial Research Centre.
Climate change poses a significant threat across many regions and sectors, and businesses. Insurers and asset managers, must play a role in ensuring transparency around climate related risks and opportunities.
Whilst insurers have been performing stress and scenario testing for many years, in the last 12 months the PRA has increased its focus on the ability to identify, measure and increase financial and operational resilience.
There is widening debate that many of our social, financial and regulatory institutions need to be rethought so that we can create more sustainable futures, particularly in light of the Covid-19 pandemic, the policy/macro-economic response to the pandemic and how it affects consumers, as well as the impending climate crisis. This multi-day series of three keynote webinars, individually presented by leading economist John Kay, Sir Paul Collier, Professor of Economics and Public Policy at the Blavatnik School of Government, Ashok Gupta, Chair at Mercer Ltd, and Nico Aspinall, Chief Investment Officer at B&CE, will open up discussion on these essential topics. The series will culminate in a panel session with Chief Economist of the Bank of England, Andy Haldane.
This webinar provides an overview of the state of the UK protection market, and how different insurers are using different levels of sophistication to price (such as using customer demand models). It considers how insurers have implemented these sophisticated pricing techniques, and the practical challenges they have faced.
This discussion will revolve around the latest industry developments including and introduction to Part VII transfers and Schemes of Arrangement (process, parties involved and recent events), insights and lessons from recent with-profits transactions and restructurings (including Equitable Life and Pru-Rothesay), how firms can apply these learnings to future arrangements, and the outlook for future with-profits transactions and restructurings (including the impacts of Covid-19 and Brexit)
What is stewardship and how has the landscape changed under the 2020 UK Stewardship Code? How does effective stewardship create long term value for beneficiaries and what roles do asset owners and asset managers play in active stewardship. This webinar will offer answers to these questions in a practical approach to stewardship reporting.
Dr Catherine Donnelly will present the basics of the structures for pooling longevity risks and summarise recent research results in this area in addition to outlinging future research around this topic. This is work under a research programme funded by the IFoA's Actuarial Research Centre, called 'Minimizing longevity and investment risk while optimising future pension plans'.
Mis-estimation risk is a key element of demographic risk, and past work has focused on mis-estimation risk on a run-off basis. However, this does not meet the requirements of regulatory regimes like Solvency II, which demands that capital requirements are set through the prism of a finite horizon like one year. This paper presents a value-at-risk approach to mis-estimation risk suitable for Solvency II work.