UK - The £1.5bn (€1.73bn) Kingfisher defined benefit pension scheme plans to stick with its 'DIY de-risking' programme, but warns that increased market volatility requires greater trustee time and resources.
Dermot Courtier, secretary of Kingfisher Pensions Trustee, said the pension scheme would maintain its internally managed programme of hedging against inflation and interest rate risk that was commenced in 2006, although it does monitor new solutions available in the market.
The comment was made in an interview with Clear Path Analysis for its upcoming report 'Buy-ins and buy-outs for pension schemes', on how pension funds might choose to adopt "do it yourself" (DIY) de-risking methods rather than purchase buy-in or buyout solutions (See earlier IPE article: Pension funds could turn to DIY buyouts).
But despite Courtier's confidence in Kingfisher's approach, he warned that increased market volatility had required more frequent decision-making and responses to change from the pension fund and its trustees.
He said: "Given the sheer volatility in the market we've seen over the past two to three years that monitoring has only accelerated. So one has not only got to monitor but also accelerate one's decision making to ensure you're agile enough to deal with the market conditions that prevail at any one time."
Courtier told Noel Hillman, managing director of Clear Path Analysis, that the hedging process "slotted in as a sub element within the overall scheme de-risking plan". Other de-risking activities that were considered by the trustees in 2005, following discussions with the scheme's sponsor, included investing all cash contributed by employer in bonds rather than return seeking assets.
Courtier noted that the Kingfisher scheme had no plans to change its practice and pursue a buy-out or buy-in with an external insurance provider, but this meant trustees and investment committee market volatility.
For instance, if a decision needed to be made on the hedging programme that could not wait until the next quarterly meeting, Courter would email a briefing paper to all the members and ask trustees to take a decision, in conjunction with external investment advice.
Courtier warned other pension schemes considering a similar approach not to underestimate the value of trustee education in this context. He said: "We have been running a regular programme of trustee knowledge and understanding. We've been employing professional investment advisers to assist us in the running of these programmes, often linked to a particular investment issue raised at an investment meeting."
Courtier confirmed the scheme would continue to review and monitor its current hedging programme going forward. He added Kingfisher would also be looking at the "robustness of the new products that are coming into the marketplace, like longevity and mortality hedging programmes".