DC Pension Investment Strategies

Course overveiw The global pensions landscape is evolving rapidly with Defined Contribution (DC) pension schemes today representing more than 45% of all global pension fund assets, with growth in this segment forecast to exceed double-digit rates in most parts of the world. In fact, DC plans are today the primary source of most workers’ retirement income. This growth is accompanied by major challenges confronting the DC pensions industry that range from the optimal DC design, the choice of DC default funds, the right regulatory and governance framework for DC schemes, the appropriate charging structure and the best way to communicate, educate and engage with DC investors. Furthermore, Governments and Regulators are keen to encourage DC pension innovations and the development of new products which will give savers more certainty about their pensions and encourage more risk sharing. In the U.K., for example, the Government is keen to explore the scope for new types of scheme called ‘Defined Ambition’ pensions that seek to give greater certainty for members about the final value of their pension pot and less cost volatility for employers and sponsors. Why a DC Pensions Investment Strategies course? This new 3 day training programme builds on Euromoney’s highly popular Pension Fund Strategy course offered in key financial centres. This new DC Pensions Investment Course focuses exclusively on Defined Contribution pension schemes and covers all the relevant issues surrounding optimal DC scheme design, DC default fund creation, DC glide path structures and DC investment strategies and solutions. This comprehensive programme addresses many of the current pension issues in the Defined Contribution area. It is approached from both the asset and liability perspectives to give the delegate a holistic appreciation of the complex issues involved. Methodology This course consist of a combination of classroom lectures, practical exercises and interactive case studies. Who should attend this training course? The DC Pension Investment Strategies programme has been designed to meet the needs of the following participants : DC investment consultants DC scheme designers Pension advisors Pension scheme administrators Pension accounting staff Pension reporting staff Pension investment consultants Pension fund managers Trustees Finance staff Actuarial staff Asset/Liability consultants Pension product developers Asset allocators/investment strategists Insurance company staff Regulators Pension governance specialists Pension risk specialists Supporting publication
Day 1: DC Pension Schemes Move to Centre Stage Session 1 – Retirement Planning Today – The DC Imperative A brief history of the development of DC pension plans DC Plans – a great social experiment ? Advancements and developments in DC plan design How DC fits into retirement planning today Retirement planning is both a journey and a destination The controversy surrounding DC pension plans Making the move from a DB plan to a DC plan The growing importance of DC default funds in the pensions landscape Questioning the assumptions behind DC plans Trainer Led Discussion: Are DC Pension Plans Fit for Purpose ? Session 2 – The Pace of Innovation in Today’s DC Investment Landscape The investment structure of DC plans The re-engineering of DC plans Auto-enrollment, auto-contribution escalation, auto-asset allocation How target-date and target-risk strategies have revolutionised DC plan investing Why plan sponsors are looking to acquire increased control over investment options Open architectures and customised target-date strategies Case Study: Participant Directed DC Plans Session 3 – Factors Influencing DC Outcomes Measuring a DC plan’s success Can a DC plan provide the same income level as a DB plan ? Appropriate retirement income-replacement ratios Why DC plan success requires a new approach Why the focus should be on outcomes and not price/cost Contribution levels, charges, investment returns, decumulation Case Study: Defined Benefit Vs Defined Contribution Pension Schemes Session 4 – Product-Based and Guidance-Based Solutions Key parties in the retirement value chain Understanding members and their desired pension outcomes Plan design issues Vs plan outcome isssues Constraints in making optimal retirement decisions Necessary steps towards adopting the right behaviours Retirement readiness check-ups Case Study: Product and Guidance Based Solutions Day 2: DC Pension Scheme Design Session 1 – DC Scheme Design Considerations Risk and control variables in DC stochastic pension modelling Why diversified growth funds are built into lifestyle structures Stochastic lifestyling Vs deterministic lifestyling Creating an income drawdown option Deferred annuities Retirement bridges Phased annuitisation Adopting the “90-10-90 strategy” Case Study: Designing a Fit-for-Purpose DC Pension Scheme Session 2 – Default Fund Design and Different Types of Default Fund What is the default fund? What benefits did Qualified Default Investment Alternatives (QDIA) bring to U.S. DC plans Factors to consider when designing the optimal investment strategy The approach to de-risking ahead of retirement Why de-risking periods are becoming longer Building default fund design around member needs The different types of default fund: Old style Lifestyle Alternative style Case Study: Designing an Appropriate Default Fund Alternative Session 3 – Optimal Glide Path Design What is the glide path? Factors to consider in selecting and managing a target date glide path Using the optimal glide path to increase or decrease risk Should the glide path be managed to the retirement date or through the retirement date ? Incorporating retirement income goals along with desired risk exposure in developing the glide path Optimal asset allocation strategies in glide path design Reviewing the glide path development process Customised glide path structures Case Study: The Optimal Glide Path Design Session 4 – Hybrid Schemes and The Development of Defined Ambition and Collective DC Schemes The growth of hybrid schemes in the DC space Why risk-sharing is the driving trend Principles for development of Defined Ambition pensions Career average revalued earnings (CARE) schemes Cash balance schemes Schemes using longevity adjustment factors Collective DC schemes Case Study: Hybrid DC Pension Schemes Day 3: Optimal DC Investment Strategies and Solutions Session 1 – The Evolution of Lifecycle Funds Target risk funds Target date funds Hybrid target date funds Target income funds Generic retirement income funds Case Study: How Target Date and Target Risk Funds have Revolutionised DC Plan Investing Session 2 - Investment Strategies for The Accumulation Phase The optimal asset allocation of a DC pension fund – factors to consider Key risks to hedge – investment, inflation, interest rate and longevity Deciding on the appropriate portfolio structure and benchmark Portfolio optimisation with drawdown constraints Strategic asset allocation in the presence of liabilities The target return and minimum acceptable return The return orientation of the Pension Fund – relative, absolute, unconstrained Surplus optimisation – LMAP and RAP The importance of alternative assets The importance of inflation-hedging assets Case Study: Investment Strategies for The Accumulation Phase Session 3 – Investment Strategies for The Decumulation Phase The minimum acceptable return (MAR) and minimum acceptable income (MAI) Liability-matching strategies – LDI investing, duration matching and cashflow matching Strategies with upside – unconstrained investing, portable alpha and dynamic contingent immunisation Capital protection strategies – absolute return and liability hedging Inflation protection strategies High income strategies with regular drawdown structures Generating real returns – new asset classes, controlled volatility and structural alpha Case Study: Investment Strategies for The Decumulation Phase - Dynamic Investment Approaches