FTSE Launches Indexes Targeting DC Pension Scheme

October 13, 2014

Global index provider FTSE has announced the launch of a new index series that will represent the performance of a defined contribution (DC) pension fund’s glide path. Launched in conjunction with Elston Consulting, the index is intended to be customised for any DC pension scheme and hopes to boost governance for auto-enrolment’s new 9 million new UK DC saver scheme.

The FTSE UK DC Benchmark Index Series represents the performance over time of a simple two-asset portfolio that moves progressively away from growth assets to income assets, and is measured for discrete cohorts of savers grouped by expected retirement date. It is hoped that the series will reflect the broad evaluation of both ‘lifestyle’ and ‘target date’ DC default investment strategies.

There are three index (risk based) groups reflecting different equity allocations at the outset, offered as standard: the FTSE UK DC 100% Standard Benchmark, the FTSE UK DC 80% Standard Benchmark and the FTSE UK DC 60% Standard Benchmark.

Mark Makepeace, CEO at FTSE Group, said: “The FTSE UK DC Benchmark Index Series will provide Defined Contribution providers, fiduciaries and decision-makers with an independent and transparent means of measuring the value added during the investment process.”

Henry Cobbe, Managing Director of Elston Consulting, added: “By enabling a quantifiable evaluation of DC strategy performance, using these innovative benchmarks and related analytical tools, we hope to help providers, trustees, Independent Governance Committees, and their advisers ensure the default investment strategy for their schemes is delivering Value For Money and Good Member Outcomes from an investment governance perspective.”

Duncan Buchanan, President, Society of Pension Professionals, said: “Governance is a vital component of any pension scheme. With DC plans, as the member's benefits are directly linked to investment performance, it is important that performance can be tracked accurately and benchmarked. Automatic enrolment has been designed to encourage a savings culture and the ability for members to measure the performance of their pension savings in a transparent manner is key to promoting this culture.”

 

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