UK – Pension funds should not give in to what is ‘in vogue’ but concentrate instead on why they are investing, says a senior investment consultant at Mercer.

Ralf Frank told a conference that pension funds should not be distracted by the 'hype', but should be doing what they understand.

"It does not mean that you should stop challenging yourself," he warned - adding that pension schemes should stick to the “KISS” mentality – ‘KNOW why you invest, IDENTIFY the return you seek, STRUCTURE your investments, SPOT any problems.’

Pointing to the fact that provisional mortality tables published last week revealed that mortality was "getting lighter by up to 20%", Frank explained that pension funds would consequently have to meet liabilities for longer.

"In terms of when you look into matching your investments you need to be aware that the assumptions that a lot of actuaries used in evaluations, three years ago, are going to change.

“So what they thought their payment profile was in the future has now extended outwards because of the lighter mortality."

This new requirement should prompt pension funds to avoid being locked into investment strategies, which are extremely rigid, he told IPE.

Frequent revision of their investment strategy should help pension funds facing the new mortality rates.

"You should look at it: typically it happens every three years in line with the actuarial cycle. By looking it does not mean you have to change it. You just keep an eye." Mercers recommend quarterly revisions, he said.

"It is a sensibility check, we are not saying change every quarter," he explained – saying it serves as a “safety belt".

Pension funds have shown a willingness to monitor on a more regular basis, he said.