A glide path is a systematic de-risking strategy that increases allocations into hedging assets based upon predefined targets. Frequent triggers are funded status, interest rates and/or time. According to the survey, 67% of defined benefit (DB) plans use funded status, 28% use funded status and interest rates, and 6% use interest rates.
More than half (56%) have consultants manage their glide paths;39% have actuaries do so.
The survey also found 70% of pension plans use liability-driven investing (LDI). Among those that do not, 56% said it is because their plans are significantly underfunded. The percentage of plans reporting total LDI assets represent 51% or more of their total assets more than doubled (20% versus 9%) from 2011. In general, larger plans reported a higher allocation to LDI assets.
Other survey findings included:
- 71% of plans were either closed or frozen, up from 64% in 2011;
- The use of “8% or More” as a return assumption was down materially year-over-year, 17% of plans reported a long-term return assumption of less than 7%;
- 33% of plans reported a current funded ratio of less than 80%, versus 16% in 2011;
- The majority (60%) of plans are not considering offering lump-sum payouts; and
- 26% of plans reported they are currently considering the merits of annuity purchase for a portion of their population, 62% have not considered, and 12% considered but rejected the idea.