The anxiety that many people feel about pensions is reinforced by an unending flow of media scare stories, on anything from deficits to the burden of our aging population. And the blizzard of industry statistics comes with yet more negative commentaries.
Trustees of Defined Benefit (DB) pensions need a clear understanding of the value of their liabilities and of the returns required to provide their benefits.
With the FAB Index, we provide the realistic measure that the pension industry needs.
Our FAB Index gives trustees a best-estimate picture of funds that allows for the expected returns on the investments of the UK’s pension funds. We believe that trustees need this information, along with the buy-out solvency position, before they can arrive at a sensible value for funding.
The FAR Index helps trustees focus on the simple truth that schemes don’t need large returns to be fully funded, and that long-term returns beneath the rate of inflation are enough to provide all benefits to members.
What is the best-estimate picture of Defined Benefit pension funding?
By applying realistic future investment returns on a best-estimate (or neutral) basis, we argue that UK DB pension funds have never been better funded. We believe that in all likelihood they have more than enough money to pay all pensions due.
The FAB Index shows a surplus, while other pension indexes continue to report substantial deficits, and the FAR Index shows the relatively modest levels of return needed. Our Indices act as an antidote to the scaremongers, but our figures are true and fair.