Plotting a stable route using a variety of tools and resources
Few people get in a car without knowing where to go or a rough idea of how to get there. Yet pension schemes are often managed without a clearly expressed end-game target, or a plan of how to reach it. Like a map or GPS unit, journey planning provides you with much-needed guidance to help your scheme achieve its objectives.
Below we set out what resources are available to help you plot a stable and achievable route, taking into account The Pensions Regulator’s 2019 Annual Funding Statement and integrated risk management (“IRM”) guidance.
“Paying the promised benefits is the key objective for all schemes. This requires schemes to look ahead and set clear plans for how the objective will be delivered.”
The Pensions Regulator, 2019
If you want to know more about why The Pensions Regulator is focusing on long-term targets, consider covering some core IRM concepts at your next board training session:
The Worry Index can help trustees understand the magnitude of the risks they face, and whether they need to consider steps to mitigate these in the short-term.
Determining what destination you want to set for your scheme is best done with all your advisors under one roof, so you can agree what’s realistic and achievable.
Put yourself behind the wheel of a simulated pension scheme and manage its journey towards an end-game target.
As your scheme matures its liquidity needs change, and risk to the sponsor increases as the scheme faces greater sensitivity to investment volatility and shorter timescales for correction.
Once your end-game is agreed, it’s important to balance cash contributions with investment returns in a way that works for your specific situation.
Any analysis needs to consider the above factors, and more, in aggregate – IRM can rarely be distilled into a single number.
Determine the best way to invest your scheme’s assets, taking into account your end-game target and the level of contingent support that may be available from your sponsor.
Identify what events could cause your pension journey to go off-track, and plan how best to respond.