London School of Pensions & Retirement Planning

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"Impressive course, detailed and well arranged course material. Eloquent and very articulate course instructor" Trustee, Botswana Public Officers Pension Fund Course Overview Falling interest rates and stagnant stockmarkets are having a dramatic impact on pension schemes’ ability to fund future liabilities. The sovereign debt and global economic crises have resulted in major shortfalls in pension and retirement schemes, placing a huge amount of pressure on corporate and Government balance sheets. Several countries have a significant share of savings earmarked for retirement either through private individual savings plans or via Government pension funds. But despite rising savings rates, nume…

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Didn't find what you were looking for? See also: (Pre)Retirement, Debt, Planning, Accounting, and General Management.

"Impressive course, detailed and well arranged course material. Eloquent and very articulate course instructor" Trustee, Botswana Public Officers Pension Fund Course Overview Falling interest rates and stagnant stockmarkets are having a dramatic impact on pension schemes’ ability to fund future liabilities. The sovereign debt and global economic crises have resulted in major shortfalls in pension and retirement schemes, placing a huge amount of pressure on corporate and Government balance sheets. Several countries have a significant share of savings earmarked for retirement either through private individual savings plans or via Government pension funds. But despite rising savings rates, numerous gaps exist in private and public retirement plans and finances. Furthermore, ageing populations in many countries are creating a significant pension burden that will require innovative and radical asset/liability management strategies for years to come. Why the London School of Pensions & Retirement Planning? Ensuring sufficient resources for retirement encompassesa complex set of decisions involving assumptions on asset returns, interest rates, inflation rates, longevity and future salary growth. With inflation potentially rising in many economies, pension funds are increasingly looking to invest in real assets like infrastructure and real estate to hedge against the threat of rising prices. This negative backdrop is being played out against an environment where the corporate governance responsibilities of institutional investors and pension funds is being questioned and challenged. This comprehensive programme addresses many of the current pension issues from both the asset and liability perspectives to give the delegate a holistic appreciation of the complex issues involved. Course Focus The purpose of this comprehensive course is to help delegates understand the complex world of Pension Investment Strategy with specific reference to: Understanding the global pensions crisis The challenge to the cult of the equity The role and purpose of pension funds The different types of pension scheme Measuring and modelling a pension liability Impact of liabilities on investment strategy Pension funding policies Asset/Liability management tools Pension fund investment strategies Dynamic approaches Benchmark timing and tactical asset allocation Actuarial calculations and assumptions The annuity market Pension risk management, pension reporting and governance Who should attend? Pension scheme administrators Pension accounting staff Pension reporting staff Pension investment consultants Pension fund managers Trustees Finance staff Actuarial staff Asset/Liability consultants DC scheme designers Pension product developers Asset allocators/investment strategists Insurance company staff Regulators Pension governance specialists Pension risk specialists
Day 1 The Fundamentals of Pension Funds The Controversy Surrounding Pension Funds – a Global Perspective The global pensions crisis – European, U.K. and American perspectives The rising costs of funding pension schemes Pension fund deficits, sovereign debt and sovereign default risk Rising longevity and rising dependency ratios Falling real and nominal returns Ruptures in the investment value chain Gaps in governance structures Do Asia Pacific pension funds suffer the same problems? The growing importance of Asia Pacific pension funds in global financial markets Characteristics of the Australian and New Zealand pension markets Overview of Sovereign Reserve Pension Funds Trainer Led Discussion: Pension Fund Capitalism Delegates will assess the outlook for pension funds in the Asia-Pacific region against those in the developed markets of the U.S., U.K. and Europe Pension Fund Basics The role and purpose of pension funds The role and function of the various parties – trustees, sponsors, actuaries, consultants and investment managers The link between asset allocation, capital structure and financial risk The pension fund as a financial business and as part of the company Sources of wealth in a pension fund The fundamental pension equation The pension fund map and organisational structure – know your stakeholders Creating value in pension funds Exercise: A multiple choice exercise on the basics of pension finance The Different Types of Pension Scheme An overview of social security and state pension schemes General characteristics of pay-as-you-go schemes The changing role of private pensions Plans for reforming state social pensions Public-private, DB-DC, mandatory-voluntary, means tested-non means tested Defined benefit pension schemes Defined contribution pension schemes Hybrid defined benefit, defined contribution schemes Should DB pension schemes be career average or final salary? Case Study: Defined Benefit Vs Defined Contribution Pension Schemes Delegates will design a checklist on the factors to consider in designing a DB scheme and a DC scheme Guest Speaker Presentation by Amin Rajan, CEO, CREATE Investing in the Age of Volatility Why will markets remain volatile for the next 5 years How can pension plans convert volatility into an investment opportunity As old style diversification no longer works, what will the new style look like Where will the return come from What do pension funds need to do to ensure that investing is not a loser’s game for them Day 2 Pension Fund Asset-Liability Management Pension Fund Liabilities Measuring and modelling a pension liability Selecting the appropriate discount rate The actuarial value of liabilities The liability return as a hurdle rate Impact of liabilities on investment strategy Liabilities and funding policy Risk management and liabilities Theory of surplus returns and surplus asset allocation Surplus risk and the risk-adjusted change in surplus Funding probabilities Case Study: Pension Fund Liability Study Delegates will analyse a pension fund with an asset-liability mismatch and an inappropriate asset allocation policy. They will be required to make a number of important policy decisions for the fund Pension Funding Policies Pension funding policies Determination of the required funding contribution The funding target The pace at which the target is attained - Funding policies and benefit policies - Building and accumulating reserves in the fund - The lack of symmetry in the treatment of surplus and deficit - The relationship between pension assets and liabilities Case Study: Pension Funding Policy Delegates will select the fund’s appropriate contribution rate and strategic asset allocation that minimises a weighted sum of surplus risk and contribution risk Asset-Liability Management Tools Static portfolio analysis for asset allocation Dynamic portfolio analysis with assets and liabilities Dynamic models for asset-liability management in defined benefit pension funds Minimising surplus risk and contribution risk Contribution and benefit policies for underfunded schemes Developing a strategic benchmark in an asset-liability framework Integrated asset-liability management Case Study: Asset-Liability Management for a Pension Fund Delegates will examine how an asset-liability study might be conducted and how strategic asset allocation decisions can affect a number of important asset-liability variables Asset-Liability Modelling What is asset-liability modelling and why do it? What can an asset-liability study realistically achieve? Current issues in asset-liability modelling The liability matching asset portfolio - LMAP Can asset-liability modelling generate a LMAP? The actuary’s confidence in the economic/demographic projections and correlation assumptions Case Study: Asset-Liability Modelling Delegates will review the results of an asset-liability study and design an appropriate investment strategy to match accordingly Day 3 Pension Fund Investment Strategies Strategic Asset Allocation and Portfolio Optimisation – Setting Objectives The optimal asset allocation of a pension fund – factors to consider The fund manager’s relationship with the trustees Deciding on the appropriate portfolio structure and benchmark Portfolio optimisation with drawdown constraints Strategic asset allocation in the presence of liabilities Portfolio diversification – the importance of correlation The target return and minimum acceptable return The return orientation of the Pension Fund – relative, absolute, unconstrained Core/explore/satellite approaches The importance of alternative assets The importance of inflation-hedging assets Case Study: Strategic Asset Allocation for a Pension Fund Delegates will devise an appropriate portfolio structure and relevant benchmark for a pension fund facing shortfall risk Tactical Asset Allocation and Benchmark Timing The move away from static benchmarks Dynamic approaches to asset allocation – tactical, integrated and insuredAlpha, beta and market timing Market cycle analysis Factors affecting asset prices in different phases The equity cycle and how it interacts with the interest rate and credit cycles Sector and style allocation at each phase of the cycle Case Study: Tactical Asset Allocation through the Economic Cycle Delegates will devise a tactical asset allocation framework for a pension fund. Emphasis will be placed on important retirement considerations like target retirement date and lifecycle issues Dynamic Approaches to Pension Fund Management Liability-matching strategies – LDI investing, duration matching and cashflow matching Strategies with upside – unconstrained investing, portable alpha and dynamic contingent immunisation Limiting the sponsor risk – absolute return and liability hedging Generating real returns – new asset classes and structural alpha Target date investing and target date funds Lifecycle investing and lifecycle funds Case Study: Dynamic Investment Approaches Given a choice of dynamic investment approaches, delegates will be required to choose the approach that best matches the needs and profile of the fund Guest Speaker Presentation by Bobby Riddaway, Head of Investment Consulting, Capita Employee Benefits Plotting a Path to Full Funding Setting an objective for full funding Defining a plan to achieve it Liability issues to address before implementing The mechanics of how to make the plan successful Governance options The end game Day 4 Actuarial Considerations, Scheme Design and the Annuity Market Role and Responsibilities of the Actuary The role of the pensions actuary The actuaries’ contribution to the existence of pensions How the role of the actuary is changing Advocate or broker; calculator or auditor Conventional pension accounting and actuarial standards How useful are conventional actuarial and accounting methodologies Case Study: The Role of the Actuary Actuarial Calculations and Assumptions The actuary’s choice of discount rate Why the confusion and controversy surrounding the choice of discount rate Lessons from financial economics and modern portfolio theory Demographic and economic/financial assumtions Actuarial value of assets Actuarial value of liabilities Moving to an economic accounting system for pensions Risk does not diminish with time, it accumulates Case Study: Synchronising Asset Allocation and Funding Recommendations with the Actuary’s Recommendations Scheme Design Considerations – DC Plans DC scheme design in the accumulation phase Risks confronting the DC member Risk and control variables in stochastic pension modelling Charges attached to DC schemes The distribution phase of DC pension schemes Optimal design of DC schemes during the distribution phase The annuitisation decision Case Study: DC Scheme Design in the Accumulation Phase Annuities Overview of the annuity markets Different types of annuity – purchase arrangements, coverage, variations, payment terms ILRIPs – Investment-linked Retirement Income Programmes Decomposition of annuity charges Designing and stress-testing the various ILRIPs Case Study: The Annuity Market Guest Speaker Presentation by Georg Inderst, Independent Adviser, Inderst Advisory Infrastructure Investing for Pension Funds Risks and rewards of infrastructure as an asset class What are the characteristics of infrastructure investing that appeal to pension funds The unique characteristics of infrastructure Opportunities and pitfalls of infrastructure investing for pension funds What is required for successful infrastructure investing Day 5 Pension Risk Management, Pension Reporting and Governance Pension Risk Management Defining pension fund risks Different types of risk and what they mean for a pension fund Asset-liability risk, tactical risk and manager selection risk Funding risk Solvency risk Surplus risk and contribution risk Counterparty credit risk Interest rate mismatch risk Tracking error, VaR and downside risk measures Case Study: Pension Risk Management Applying a number of statistical risk measures in analysing and managing the risk in a pension fund Longevity Risk Hedging and Transfers What exactly is longevity risk De-risking a pension fund The potential impact of ageing populations on asset returns Longevity risk transfers and pension buy-outs and pension buy-ins The development of mortality-linked securities and derivatives Longevity bonds and longevity swaps Hedging pension liabilities with longevity-linked securities and derivatives Case Study: Managing Longevity Risk Delegates will assess some high profile moves by pension funds to manage their longevity risks Pension Scheme Reporting Key issues in pension scheme reporting Developing appropriate reporting mechanisms Reporting on funding status Trustee reporting Performance and attribution reporting Risk management reporting Case Study: Pension Scheme Reporting Pension Governance and Organisation Structure The pension mission statement Best practice governance of pension schemes Trustee board effectiveness Legal and governance structure of pension funds Codes of governance for pension funds Ways to improve pension fund governance Lessons from the Netherlands and Australia Trainer Led Discussion: Pension Fund Governance Course summary and close
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