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DC Default Funds Roundtable

Monday, April 24, 2017

DC Default Funds Roundtable

Our previous roundtable discussion which was hosted last year highlighted an increased focus given to Defined Contribution (DC) Default designs, as schemes’ and their sponsors responded to the challenges posed by investment markets, the charge cap and members illustrating a desire to take benefits more flexibly. 


This has resulted in the adoption of more risk-based glide-paths, one nominated as the central “Default” targeted to a broadly diversified portfolio representing 75% of the members’ pot with the remainder invested in a cash fund. At least two further options would typically move through to either cash or, a proxy annuity matching portfolio. 


For the most part DC “Defaults” continue to operate within the confines of a lifestyle/ pre-set de-risking structure, linking the end point to the scheme’s “Normal Retirement Age” or State Pension Age (the exception being schemes offering a series of Target Dated Funds). 


From an accumulation point of view these are all positive steps towards assisting members with aligning their portfolios to what is more likely a flexible future withdrawal pattern. However, further work is needed to determine the best method for locking in past investment gains and to consider whether de-risking should be taking place much closer to the point the member actually draws their benefits. 


CAMRADATA’s Roundtable focuses on how the DC market continues to evolve 12 months on, the challenges faced by the industry as a whole and importance of continuing to monitor default funds that are offered by employers.


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