FTSE Group and PensionDCisions, a specialist in retail investor analytics, have launched the FTSE PensionDCisions DC Index Series.
The new index series is the first objective benchmark for the UK’s defined contribution pensions market.
The index series brings to the market a set of tools to aid objective measurement of the performance and risk profiles of default strategies in UK DC plans.
Using FTSE’s index design standards and PensionDCisions’ 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 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 a 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 three target-dated indices; and point of retirement – At-retirement Index.
Bill Galvin, strategic development executive director from the Pensions Regulator, says: "Over 80 per cent 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."
Tony Raw, managing director Europe at FTSE Group, says: “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.”