Mercer | Defined Benefits: Today and Tomorrow Research

Mercer | Defined Benefits: Today and Tomorrow Research

WEALTH AND INVESTMENTS

Defined Benefits: Today and Tomorrow

Latest research into defined benefit pensions provision in the UK


We have partnered with the Pensions Policy Institute on a project to bring together the latest data on the state of private sector Defined Benefit (DB) pensions in the UK, and to consider the problems and opportunities facing DB pension schemes.

The research was conducted by the Pensions Policy Institute and supported by a series of roundtables, with a wide range of representatives from Government and industry, to ensure a broad range of views and concerns was reflected. Despite the variety of views raised during the roundtables, there was broad consensus of the value DB schemes provide to members and the costs and risks this has imposed on employers.

The research is very timely as it provides background to many of the questions raised in the government’s Green Paper, “Security and Sustainability in Defined Benefit Pension Schemes”.

Research Paper 1: ‘Defined Benefits: today and tomorrow’

The first paper describes the trajectory taken by occupational pension provision over the past 50 years. It explores the complex set of reasons behind the decline in DB provision and the challenges facing sponsors, trustees, government, regulators and members.

  • How has DB pension provision in the private sector in the UK developed over the years?
  • What have been the factors behind the decline in DB provision?
  • What challenges are sponsors, trustees, government, regulators and members facing?
  • What options are available to sponsors, trustees, government and regulators to help schemes facing challenges?

Download the paper


Research Paper 2: ‘Defined Benefits: the role of governance’

The second paper looks at trusteeship, reflecting on the role played by trustees in ensuring that schemes are well run and, as far as is possible, deliver in full the benefits accrued to members.

  • What is the role of DB pension scheme trustees?
  • What are the benefits of good governance and examples of good practice?
  • What is the gap between good and poor governance currently?
  • Is there a relationship between scale and governance?
  • How can scheme governance be improved?

Download the paper


Research Paper 3: ‘Defined Benefits: valuing and managing liabilities’

The third paper explores the subject of DB liabilities. It examines the size, trend and shape of UK DB scheme liabilities and looks at the plethora of methods used to measure DB liabilities. It also considers the particular impact of bond yields and longevity trends on pension scheme liabilities, plus the options available for controlling and de-risking liabilities.

  • What do UK DB scheme liabilities look like currently?
  • What are the methods used to measure DB liabilities?
  • How have bond yields and longevity trends impacted pension scheme liabilities?
  • What are the mechanisms available for controlling and de-risking liabilities?

Download the paper


Research Paper 4: ‘Defined Benefits: managing assets and investment strategy’

The last paper discusses the challenges and opportunities trustees face when managing scheme assets and investment strategy. It considers the scale and growth of DB scheme assets, how asset allocation has changed and the factors which are influencing DB scheme investment strategy. It also looks at how investment trends may evolve over the coming years.

  • How has asset allocation changed in recent years?
  • What factors are influencing DB scheme investment strategy?
  • What are the different investment strategies at play in today’s market?
  • What trends are we likely to see in the coming years?

Download the paper

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