Improved scheme funding levels have helped WTW secure five new UK defined benefit (DB) investment advisory appointments in the past nine months, totalling £30bn in assets.
This covers DB schemes in the insurance, energy and technology sectors, including the IBM UK Pension Plan.
WTW says these schemes have share a common objective: to implement a more robust risk management framework that will enable them to achieve self-sufficiency, to the benefit of all stakeholders.
Many DB schemes have seen funding levels improve significantly over the past year, any many are now weighing up the merits of long-term run on strategies while they consider surplus sharing flexibilities.
WTW has seen a change in the market with demand for new strategic DB advice, enabling innovation for clients looking for resilient investment portfolios and liability hedging frameworks.
WTW head of GB investment strategy Alasdair Macdonald says: “Trustees and sponsors are beginning to recognise that a continued drive to reduce investment returns may be counterproductive. There is good logic to retaining a modest amount of investment return as part of a broader risk management framework which accounts for funding risks.”
Dave Aleppo, managing director in WTW’s Investments business adds: “We are delighted to have received the support and validation of our new strategic proposals from such high-profile UK pension schemes. In partnering with more DB schemes, we are confident that we can provide greater security for members and certainty for sponsors.”
A related article recently published by WTW, entitled Does low risk always mean ‘low return’?, explores the importance of integrating funding-related risks into decision making when managing low-risk pensions schemes. It cautions against the danger of excessive de-risking in investment strategies and of managing the wrong risks, which can lead to low returns without materially diminishing overall risk.
