Defined Benefit solutions

Investing to meet your Long Term Funding Objective

At Aberdeen Standard Investments we work in partnership with our pension scheme clients to help them achieve their Long Term Funding Objective. Whatever your pension scheme’s objectives, we can tailor an investment solution to suit your journey. With extensive endgame capabilities and a responsible investing approach that aims to deliver value for clients, ASI is well placed to help schemes travel towards their Long Term Funding Objective.

Our Approach

We work with a wide range of pension schemes of all sizes. Our investment capabilities and pooled fund solutions help schemes achieve their specific investment needs – be that growth (to help improve your funding position), income (to meet your benefit payments), or protection (by hedging unwanted risks).

We recognise that all pension schemes are different. We partner with our clients and their advisers to understand their ultimate objectives and deliver solutions to meet each client’s unique circumstances – wherever they are on their journey, and regardless of their ultimate endgame destination.

As schemes approach their endgame, a very specific skillset is required to build and implement appropriate investment portfolios – our insurance heritage, extensive investment capabilities, and Responsible Investing approach makes us uniquely placed to work in partnership with schemes as they navigate to their endgame.

UK Pensions Awards 2020

We are delighted to have been shortlisted for Cashflow Driven Investment Manager of the Year for the 2020 UK Pensions Awards.

Endgame

Endgame expertise

Navigating to your DB endgame

A sharper focus on the endgame

As DB pension schemes mature and funding levels improve, there is a sharper focus on investing for the endgame, be that an insurance company buyout, self-sufficiency, or transfer to some form of consolidation vehicle.

Meeting the evolving requirements of your investment strategy

As schemes mature and funding levels improve, many trustees are changing the focus of their investment strategy. During the accumulation phase, a typical scheme would focus on growth assets to close funding deficits alongside a liability driven investment (LDI) solution to hedge interest rate and inflation risk. As schemes mature and navigate towards their ultimate endgame, the focus is increasingly shifting to income and cashflow matching.

A different skillset is required for the endgame

A very specific skillset is required to build and implement appropriate investment portfolios to help pension schemes navigate towards their endgame. We offer expertise across fixed income, alternative sources of contractual income and liability driven investment. Our insurance heritage, extensive investment capabilities, and ESG approach makes us uniquely placed to work in partnership with pension schemes to help them achieve their goals.

Solutions

Solution Management

Solution Management

Initial solution design

We currently offer a free solution design service to help clients and their consultants build robust investment solutions to meet their objectives. This can involve detailed solution design covering growth, income and hedging objectives, and can utilise ASI pooled funds (including our newly expanded Liability Aware fund range) and / or more bespoke segregated solutions.

Ongoing solution management

The COVID-19 crisis has highlighted to many trustees and sponsors the burden of independently running DB pension schemes, particularly the monitoring and management of the investment strategy during volatile market conditions. In the aftermath of the pandemic we expect many trustee boards to review their governance arrangements. At ASI, we can provide holistic ongoing management of a pension scheme’s investment solution, utilising the Reference Portfolio approach. We can respond to our clients’ particular circumstances; providing support and advice around the key decisions that will remain with trustees; and also a clear and accountable process for the implementation that we have responsibility for.

Responsible investing

Responsible Investing

Responsible Investing

Our goal

At Aberdeen Standard Investments (ASI), our vision is to invest for a better future. We want to make a difference for our clients, society and the wider world – while also delivering financial returns. Environmental, social and governance (ESG) considerations have been an integral part of our decision-making process for almost 30 years. By putting ESG factors at the heart of our investment process, we believe we can generate better outcomes for our clients. The impact of Covid-19 makes this goal even more important. Now, more than ever, we need to work together for a more sustainable future.

Our approach

Responsible investing is about delivering value for clients. Our approach falls into two areas. At the investment stage, we use ESG factors to help decide where best to invest. We integrate ESG into our research, analysis and decision-making processes. We also manage specialised funds that incorporate stronger sustainability or ethical principles. Active ownership is how we look after these investments. As shareholders, we vote in a considered manner and work with companies to drive positive change. We also engage with policymakers on ESG and stewardship matters.

Our commitment

It starts with us. As a company, we focus on key societal and environmental issues that matter to our stakeholders, and on which we can have a positive impact. Operationally, that means reducing our emissions and providing fair and inclusive work.

  • Endgame expertise

    Navigating to your DB endgame

    A sharper focus on the endgame

    As DB pension schemes mature and funding levels improve, there is a sharper focus on investing for the endgame, be that an insurance company buyout, self-sufficiency, or transfer to some form of consolidation vehicle.

    Meeting the evolving requirements of your investment strategy

    As schemes mature and funding levels improve, many trustees are changing the focus of their investment strategy. During the accumulation phase, a typical scheme would focus on growth assets to close funding deficits alongside a liability driven investment (LDI) solution to hedge interest rate and inflation risk. As schemes mature and navigate towards their ultimate endgame, the focus is increasingly shifting to income and cashflow matching.

    A different skillset is required for the endgame

    A very specific skillset is required to build and implement appropriate investment portfolios to help pension schemes navigate towards their endgame. We offer expertise across fixed income, alternative sources of contractual income and liability driven investment. Our insurance heritage, extensive investment capabilities, and ESG approach makes us uniquely placed to work in partnership with pension schemes to help them achieve their goals.

  • Solution Management

    Solution Management

    Initial solution design

    We currently offer a free solution design service to help clients and their consultants build robust investment solutions to meet their objectives. This can involve detailed solution design covering growth, income and hedging objectives, and can utilise ASI pooled funds (including our newly expanded Liability Aware fund range) and / or more bespoke segregated solutions.

    Ongoing solution management

    The COVID-19 crisis has highlighted to many trustees and sponsors the burden of independently running DB pension schemes, particularly the monitoring and management of the investment strategy during volatile market conditions. In the aftermath of the pandemic we expect many trustee boards to review their governance arrangements. At ASI, we can provide holistic ongoing management of a pension scheme’s investment solution, utilising the Reference Portfolio approach. We can respond to our clients’ particular circumstances; providing support and advice around the key decisions that will remain with trustees; and also a clear and accountable process for the implementation that we have responsibility for.

  • Responsible Investing

    Responsible Investing

    Our goal

    At Aberdeen Standard Investments (ASI), our vision is to invest for a better future. We want to make a difference for our clients, society and the wider world – while also delivering financial returns. Environmental, social and governance (ESG) considerations have been an integral part of our decision-making process for almost 30 years. By putting ESG factors at the heart of our investment process, we believe we can generate better outcomes for our clients. The impact of Covid-19 makes this goal even more important. Now, more than ever, we need to work together for a more sustainable future.

    Our approach

    Responsible investing is about delivering value for clients. Our approach falls into two areas. At the investment stage, we use ESG factors to help decide where best to invest. We integrate ESG into our research, analysis and decision-making processes. We also manage specialised funds that incorporate stronger sustainability or ethical principles. Active ownership is how we look after these investments. As shareholders, we vote in a considered manner and work with companies to drive positive change. We also engage with policymakers on ESG and stewardship matters.

    Our commitment

    It starts with us. As a company, we focus on key societal and environmental issues that matter to our stakeholders, and on which we can have a positive impact. Operationally, that means reducing our emissions and providing fair and inclusive work.

Protection

Protection

Protection – hedging unwanted risks

The importance of hedging interest rate and inflation risks

Movements in long term interest rates and inflation can have a big impact on pension scheme funding levels, particularly where a scheme does not have a high level of hedging in place to reduce these risks. Of particular note during the start of 2020 was the influence that COVID-19 had in March, where we experienced all-time high levels of interest rate volatility.

LDI solutions for all sizes of scheme

We work with schemes of all sizes to deliver LDI solutions to meet their specific requirements. This ranges from segregated mandates through to our recently expanded flexible pooled LDI fund range. Our pension solutions team works with trustees and their advisers to help them create a solution across the pooled fund range to meet their requirements.

Integrating growth and protection

There are a large number of schemes that are looking to increase their level of interest rate and inflation hedging without sacrificing growth. Our Integrated Liability Plus Solutions (ILPS) funds are a unique, innovative approach to liability management that integrates a cash-efficient return engine with leveraged liability hedging within a suite of single pooled funds.

Income

Income

Income – meeting your cashflow requirements to pay benefits

Schemes are maturing and becoming cash flow negative

As DB pension schemes close to accrual and mature, a growing number of schemes are turning cash flow negative – with the amount paid out to members each year exceeding the amount the scheme receives in annual income from pension contributions and investments. It is important for these schemes to have a plan in place to manage their income requirements.

Implementing a cashflow aware strategy

Depending on the requirements of your scheme, this could range from looking to access sources of contractual income all the way through to a full cashflow driven investment (CDI) strategy. (CDI is where a pension scheme invests in assets that provide contractual income to match as far as possible the expected future cashflow requirements of the pension scheme.)

Schemes of all sizes can now implement a CDI strategy

Historically, a CDI approach was only really available to larger pension schemes. However, innovations in pooled fund solutions mean that schemes of all sizes can now implement this type of strategy, efficiently and at a low cost. Trustees can now choose from a full range of pooled buy-&-maintain credit funds, pooled funds offering access to alternative sources of contractual income (such as private credit) and pooled LDI funds and tailor these to meet the unique cashflow and hedging requirements of their scheme.

Growth

Growth

Growth – improving your funding level

Volatility in funding levels continues for many schemes

Over the past few years many pension schemes were experiencing a gradual improvement in their funding level, and a smooth course was being set for the pension scheme to navigate towards its endgame. However, the impact of COVID-19 on pension schemes during 2020 has shown it’s perhaps not going to be as smooth sailing as some were expecting.

Breadth of approaches to meet your requirements

Depending on your specific circumstances there are a wide range of approaches to deliver the growth that is required to improve your funding level. Our investment expertise and capabilities span equities, fixed income, real estate, private markets and Multi Asset Investing solutions.

Integrating growth and protection

There are a large number of schemes that are looking to increase their level of interest rate and inflation hedging without sacrificing growth. Our Integrated Liability Plus Solutions (ILPS) funds are a unique, innovative approach to liability management that integrates a cash-efficient return engine with leveraged liability hedging within a suite of single pooled funds.

  • Protection

    Protection – hedging unwanted risks

    The importance of hedging interest rate and inflation risks

    Movements in long term interest rates and inflation can have a big impact on pension scheme funding levels, particularly where a scheme does not have a high level of hedging in place to reduce these risks. Of particular note during the start of 2020 was the influence that COVID-19 had in March, where we experienced all-time high levels of interest rate volatility.

    LDI solutions for all sizes of scheme

    We work with schemes of all sizes to deliver LDI solutions to meet their specific requirements. This ranges from segregated mandates through to our recently expanded flexible pooled LDI fund range. Our pension solutions team works with trustees and their advisers to help them create a solution across the pooled fund range to meet their requirements.

    Integrating growth and protection

    There are a large number of schemes that are looking to increase their level of interest rate and inflation hedging without sacrificing growth. Our Integrated Liability Plus Solutions (ILPS) funds are a unique, innovative approach to liability management that integrates a cash-efficient return engine with leveraged liability hedging within a suite of single pooled funds.

  • Income

    Income – meeting your cashflow requirements to pay benefits

    Schemes are maturing and becoming cash flow negative

    As DB pension schemes close to accrual and mature, a growing number of schemes are turning cash flow negative – with the amount paid out to members each year exceeding the amount the scheme receives in annual income from pension contributions and investments. It is important for these schemes to have a plan in place to manage their income requirements.

    Implementing a cashflow aware strategy

    Depending on the requirements of your scheme, this could range from looking to access sources of contractual income all the way through to a full cashflow driven investment (CDI) strategy. (CDI is where a pension scheme invests in assets that provide contractual income to match as far as possible the expected future cashflow requirements of the pension scheme.)

    Schemes of all sizes can now implement a CDI strategy

    Historically, a CDI approach was only really available to larger pension schemes. However, innovations in pooled fund solutions mean that schemes of all sizes can now implement this type of strategy, efficiently and at a low cost. Trustees can now choose from a full range of pooled buy-&-maintain credit funds, pooled funds offering access to alternative sources of contractual income (such as private credit) and pooled LDI funds and tailor these to meet the unique cashflow and hedging requirements of their scheme.

  • Growth

    Growth – improving your funding level

    Volatility in funding levels continues for many schemes

    Over the past few years many pension schemes were experiencing a gradual improvement in their funding level, and a smooth course was being set for the pension scheme to navigate towards its endgame. However, the impact of COVID-19 on pension schemes during 2020 has shown it’s perhaps not going to be as smooth sailing as some were expecting.

    Breadth of approaches to meet your requirements

    Depending on your specific circumstances there are a wide range of approaches to deliver the growth that is required to improve your funding level. Our investment expertise and capabilities span equities, fixed income, real estate, private markets and Multi Asset Investing solutions.

    Integrating growth and protection

    There are a large number of schemes that are looking to increase their level of interest rate and inflation hedging without sacrificing growth. Our Integrated Liability Plus Solutions (ILPS) funds are a unique, innovative approach to liability management that integrates a cash-efficient return engine with leveraged liability hedging within a suite of single pooled funds.


Protection

Exceptionally diversified solutions  to allow investors to diversify risk and optimise investment opportunity

Income

Exceptionally diversified solutions  to allow investors to diversify risk and optimise investment opportunity

Growth

Exceptionally diversified solutions  to allow investors to diversify risk and optimise investment opportunity

Related videos

Cashflow Driven Investing: Holistic solutions for DB schemes

Liability Aware Investing: Helping DB schemes navigate towards their endgame

Liability Aware Investing: Pooled funds for DB schemes

Investing for the DB endgame

Contact us

Ken Tooze

Ken Tooze

UK Distribution Director - Institutional

Graeme Oudney

Graeme Oudney

Associate Director
Universities, Endowments and Charities

Mark Foster

Mark Foster FFA

Global Head of Pension Solutions

Douglas Hogg

Douglas Hogg

Senior Solutions Director - Pensions

Keith McInally

Keith McInally FFA

Senior Solutions Director - Pensions

Timea Varga

Timea Varga

Senior Solutions Specialist - Pensions

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Risk warning
Risk warning - Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results.