This report is Chapter 2 of the UK Findings from Aon's Global Pension Risk Survey 2019. Download the report above to learn more about Investment Strategy Considerations for the UK.
Welcome to the 2019 Global Pension Risk Survey findings concerning investment strategy. These findings form part of our overall 2019 survey of UK defined benefit (DB) pension schemes.
We carry out the Global Pension Risk Survey every two years, and looking back over the last decade, we can see how the pensions landscape has developed. Ten years ago, schemes were dealing with the fallout from the global financial crisis, and over the following years, increasing numbers of schemes closed to accrual in response to rising costs.
As a result, schemes began to set their sights on long-term, lower-risk destinations, but market conditions and, initially, rising longevity seemed to conspire against making progress. The ultimate low risk target forever seemed just out of reach. However, in recent years, schemes’ long-term objectives have grown closer than they have ever been (see chart), as schemes mature.
Maturity is a key theme of this survey, as it is of many of The Pensions Regulator (TPR)’s recent statements, including the 2019 Annual Funding Statement. As many schemes see significant amounts of liabilities transferring out, they are maturing rapidly, and decisions around long-term targets, management of liabilities, investment strategy and approaches to hedging longevity risk have come more sharply into focus. Even open and less mature schemes will be affected by these changes as well as by the pressure from TPR to have a long-term target. There are also new issues for schemes to confront in 2019, including cyber risk and (finally) dealing with GMP equalisation after 2018’s Lloyds Bank court case ruling.
In this set of findings, we look in detail at how schemes have set their investment strategies. The survey findings relating to the other subject areas in the survey are available separately.
Download the full report above to learn more about this topic.
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