Rethinking the pension plan endgame: Hibernation, termination or stabilization?
Today, with ample funding and an abundant set of investment opportunities available to them, pension practitioners should adapt by setting a new long-term strategic goal: stability.
In this special report for U.S. private pensions, we present pension stabilization as an alternative to the widely adopted industry model of glide path de-risking toward hibernation or eventual termination of existing plans.
U.S. pension investors have been actively de-risking their defined benefit plans since the global financial crisis, but further movement to long duration fixed income will be increasingly inefficient and unlikely to achieve long term goals. Recent changes to legislation effectively remove a key operating risk that led many sponsors to initiate their de-risking programs.
Stabilization looks to redirect glide path strategies away from highly concentrated liability-driven investment programs toward a more efficient low volatility strategic allocation.