Despite substantial contributions from plan sponsors, as well as strong equity markets, lower interest rates and increasing longevity, gains have left funded positions largely unchanged in 2017. At the time this paper was written, in late 2017, the average pension plan was only 83% funded, up just 1% over the past year. Plan sponsors continue to actively look at a wide range of opportunities across the pension balance sheet to increase returns, reduce the size of their liabilities and manage risk. Compounding their challenges is the prospect of proposed changes to corporate tax policy, which could have a significant impact on pension funding strategies and risk transfer activities. Given this highly active but uncertain environment, Mercer’s team of defined benefit (DB) experts has prepared a list of key topics for plan sponsors to focus on in 2018.
Tax reform could be a game-changer
Rising interest rates? Prepare for the transition from quantitative easing to quantitative tightening
Ensure the bonds in your fixed income portfolio are fit for purpose
The best offense may be a strong defense
Consider factor portfolios for delivering targeted exposures with less risk and less cost
Are you effectively managing private asset classes?
Continue to develop your investment governance model
What risk transfer strategy is right for your plan?
Check your hibernation portfolio
How reliable is your data?