Aon Hewitt Reveals Compelling Case for Funding Triggers

26 April 2012 (PLANSPONSOREurope.com) - Funding triggers could have improved funding levels in 70% of five-year periods over the past 20 years, according to research from Aon Hewitt.

The research also reveals improvements in funding position of 5-10% would have occurred on a regular basis, as gains would have been captured and losses avoided.

Paul McGlone, principal and actuary at Aon Hewitt, said: “We have been talking to clients about funding triggers for some time and – based on forward-looking models - demonstrating the impact that they can have. However, with this research we asked whether they would have worked in the past.  The answers were largely positive, with the results being consistent with the forward-looking analysis and showing, quite convincingly, that triggers would have been effective over most of the past 20 years.

“The key result from the research was that over the 20 year span, triggers added value in about 70% of periods.  We tested this for a variety of scheme types and asset strategies, and while the finer detail differed, the broad result was fairly consistent.  The magnitude of the additional value varied depending on the particular circumstances, but in over 20% of periods, the scheme funding position was at least 5% higher as a result of the triggers.  In around 7% of cases the funding position was at least 10% higher.”

PLANSPONSOREurope Staff
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