Rising bond yields and strong equity market returns have generally improved defined benefit pension funding ratios over recent months which may create opportunities for pension plan trustees and sponsors in Ireland to lock in gains and reduce risk. Indeed in an increasingly volatile and uncertain world there is increased appetite for better pension risk management.
The most critical tool for managing pension plan risk is a sound journey plan for both the short and long-term. A pension journey plan should ideally be more than a de-risking glide path in which equities are sold and bonds purchased as the funding level improves: it should capture the full course of actions as the plan matures.
A sponsor’s goals for pension risk transfer, funding, closing/freezing and other activities, in addition to investment management actions, should be evaluated.
Mercer has identified eight key questions that should be considered by Irish pension plan trustees and sponsors in 2017 to help lock down pension risk and ensure sustainable pension benefits for plan members.
HOW ROBUST IS YOUR PLAN COVENANT AND INVESTMENT STRATEGY?
ARE YOU READY TO RESPOND TO GROW PORTFOLIO OPPORTUNITIES?
ARE YOUR BONDS FIT FOR PURPOSE?
WILL HIGHER INFLATION CAUSE ISSUES FOR THE PLAN?
IS A 2017 CASH-OUT RIGHT FOR YOU?
ARE YOU CONCERNED ABOUT OVERFUNDING?
IS THERE AN OPPORTUNITY TO TRANSFER RISK TO AN INSURER?
COULD DELEGATION HELP?