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FTSE Group (“FTSE”), the award winning global index provider and PensionDCisions, a specialist in retail investor analytics, today announce the launch of the FTSE PensionDCisions DC Index Series. The new index series is the first objective benchmark for the UK’s Defined Contribution (DC) pensions market.
The index series brings to the market a transparent and robust set of tools to aid objective measurement of the performance and risk profiles of default strategies in UK DC plans. Using FTSE’s world class index design standards and PensionDCisions’ unique data, the family of indices reflect the actual asset allocation decisions made by plan sponsors, trustees and their advisers and the subsequent outcome default solutions deliver to consumers.
The creation of these indices will, for the first time, allow DC plans to benefit from a multi-asset class benchmark which can be incorporated in the construction, selection and monitoring of DC default solutions. Asset allocation and benchmark selection for default solutions have until now occurred largely in isolation; these indices will provide DC plans with an essential context for these decisions and will develop as the market evolves.
The indices are designed to reflect various points in the life cycle of a DC member’s pension from the growth phase, through de-risking and at retirement. The series includes:
- Saving for retirement – Growth Index
- Approaching retirement – De-risking Index consisting of 3 target-dated indices
- Point of retirement – At-retirement Index
Bill Galvin, Strategic Development Executive Director from the Pensions Regulator said of the launch, "Over 80% of DC members are in default funds, where investment decisions are taken for them. Reference points are important for those accountable for making important decisions on asset allocation and de-risking for members. Improving transparency of these outcomes in DC schemes is a challenge the industry must meet, and we very much welcome any initiatives which work towards that goal."
This is echoed with support from the NAPF. Nigel Peaple, Director of Policy, stated, “Getting DC default fund design right is one of the key challenges facing DC schemes. The new FTSE PensionDCisions DC index should help trustees, sponsors and providers develop their thinking on this difficult subject.”
Tony Raw, Managing Director Europe at FTSE Group believes, “The launch of these indices come at an exciting time for FTSE, as it rapidly evolves its index offering and brings an all important transparency to the DC market. As an organisation that works closely with some of the world’s largest asset owners and plan sponsors, FTSE is proud to be able to work with PensionDCisions to create new benchmarking opportunities for UK DC plans.”
“The index reflects the risk and return actually experienced by real consumers relying on default solutions,” says Graham Mannion, Managing Director of PensionDCisions. “This provides an independent, objective reference point to help sponsors, trustees and advisers calibrate their decisions regarding asset allocation. It also empowers the man in the street to more easily determine if their savings are being managed well. Ordinary consumers deserve this transparency.” The index series is suitable for the formation of index tracked funds and as an independent measure to support design and governance discussions between plan sponsors, trustees, advisers and providers.
