Investment strategy review and long-term funding targets

Home Investment Services Investment strategy review and long-term funding targets

We’ll keep your investment strategy moving in the right direction

Investment strategy is complex, and many trustees miss opportunities by failing to review it when circumstances change.

Your scheme’s funding position will be a significant factor. For a fully funded scheme, for example, the investment strategy tends to be relatively cautious to protect the funding position. Other schemes are more likely to plan for higher returns.

The investment strategy review should also consider the long-term funding target (LTFT). The Pensions Regulator expects to find a scheme-specific LTFT with a plan of how to achieve it.

How can First Actuarial help?

We’ll start by clarifying your scheme objectives, looking at your LTFT and listening to trustees and sponsors. Typical scheme objectives we might work towards are:

  • Buy-out – Securing benefits by purchasing an insurance policy. We’re in regular contact with insurers, and keep our pricing knowledge up to date. Our risk transfer service provides robust estimates of the likely buy-out costs, and identifies market opportunities when they arise.
  • Low dependency – Giving the scheme enough assets to reduce reliance on the sponsor in the payment of benefits. We use sophisticated risk modelling to project the funding position over time.

With our investment modelling tool, we’ll identify the key characteristics of the current investment strategy. We’ll use the model to help you assess the impact of potential adjustments to the asset allocation. Is it too risky? Are its expected returns high enough? How would adjustments affect the asset allocation?

We can then design a new investment strategy that aligns with your scheme’s objectives, sponsor covenant and circumstances. We’ll strike an appropriate balance between growth projections and the expected volatility of the funding position.

Fund selection

Once the strategy is agreed, we can help trustees select appropriate funds. If you need to make changes to your portfolio, our specialist transition team will help implement those changes. For schemes with LDI (Liability-Driven Investment), we will make sure that supporting arrangements are robust.

On an ongoing basis, we can track the performance of those funds with our investment monitoring service.

Asset allocation

We can also help you consider how the asset allocation is likely to evolve as the funding position improves over time. This is consistent with the LTFT approach that The Pensions Regulator now encourages.

Locking in gains

Once a strategy has been agreed, we help trustees to ‘lock in’ funding gains as they occur. We use an automated tool to carry daily monitoring of the scheme’s funding position. We set triggers for investment switches that align with your investment strategy and protect your funding levels.

Why choose First Actuarial?

First Actuarial’s investment consultancy team offers considerable experience of investment strategy reviews, and follows cost-efficient processes.

We’ve developed useful tools to support our clients. Our modelling tools help trustees choose between investment strategies by projecting likely outcomes. And our monitoring tools help capture funding improvements as they arise.

For us, investment strategy is a conversation rather than a lengthy, indigestible report. Our consultants provide all the support and explanations that the trustees need as the conversation progresses.

When discussing investment strategy options with trustees, we work closely with the Scheme Actuary. This will often be a First Actuarial colleague but can just as easily be a third-party actuary.

Learn more about our investment strategy review service

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Get in touch

Get in touch with one of our investment consultants to discuss how we can help you.

Investment briefings

We produce regular briefings to update trends on the latest market developments.

The team have played a major part in our achieving a very satisfactory investment performance and a stronger funding position.

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