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Member Trustee Network Conference 2013

Member Trustee Network Conference 2013. Hilary Salt . Q: What is the aim of a pension scheme? . A: . To pay the right amount of money, to the right people, at the right time. Q: What do pension scheme assets need to do?. A: .

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Member Trustee Network Conference 2013

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  1. Member Trustee NetworkConference 2013 Hilary Salt

  2. Q: What is the aim of a pension scheme? A: To pay the right amount of money, to the right people, at the right time

  3. Q: What do pension scheme assets need to do? A: …. and retain value sufficiently so that when a scheme is in run off, assets can be sold to pay the last cohort of pensioners Generate a stream of income to pay pensions as they fall due …..

  4. UK Equity Returns

  5. Proposed Methodology • Focus on future income streams correct • Generating real income streams should be a key investment strategy • This does not mean a bond strategy • Benefit outgo should drive investment strategy (not the other way around) • Pensions are long term vehicles and valuations should be a periodic assessment of whether we are going roughly in the right direction

  6. Barriers to the Proposed Methodology • Can we play the ball from where it is? • Valuations used for all the wrong things • Accounting valuations • Funding valuations • Buy-out valuation – but PPF to cover insolvency

  7. Schemes in Wind Down • Schemes closed to future accrual using ‘flight plans’ • As funding position improves, move assets into bonds to ‘reduce risk’ • What is the meaning of risk for a pension scheme? • Risk of falling funding position measured against a bond based valuation measure • Risk of not meeting the benefits (or the benefit expectation) • Problems with DC ‘reckless’ caution, funding for buy-out

  8. Things to Watch For The attitude of the Pensions Regulator A lucky pair? Defined ambition

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