Drawing on its resources as a research-driven global investment manager, AllianceBernstein launched the first customised target date defined contribution (DC) platform in the UK in October 2009. Their DC business now offers an array of investment services that can be used to construct open-architecture, bespoke and packaged DC default funds. It has also developed a retirement income product designed as an alternative to annuities in the early stages of retirement.
AllianceBernstein carries out extensive research into the issues facing DC schemes and how best to tackle them. Their research, insights and other useful resources are available below.
For further details on Target Date Funds click here or visit their FAQ page here. Alternatively, contact Tim Banks, Head of Client Relations Pensions Strategies Group, at Tim.Banks@alliancebernstein.com
Flexibility is key
Given the pension industry’s journey of seemingly continuous change, a future-proof default strategy might seem like a distant hope. Many traditional schemes are too unwieldy to adapt to change and providers have tended to try to tinker with the ‘engine’ with each development rather than taking a step back to consider what’s really needed in order to design a modern investment vehicle for the long-term. Read more.
A fresh look at defined contribution governance
Now, more than ever, for the investment default, we believe that trustees should be focusing on five key areas: setting the scheme’s objectives; building the strategic asset allocation model; designing the glidepath; selecting the fund managers and reviewing their work. Critically, what’s missing from this is allocating money tactically. Read more.
One off pension guidance will leave savers none the wiser
With the new pension freedoms taking effect early next month we believe the first priority is to look after the silent majority – those 80% of DC scheme members who are "hands off” when it comes to their retirement planning and have chosen (or drifted into) default funds. One-off pension guidance is unlikely to have a long-term material impact on improving savers post-retirement income outcomes. Surveys show that most people don’t plan ahead for life in retirement and will want a more detailed examination of their requirements to understand and decide upon the best course of action.
So, with old certainties gone and the new situation in flux, savers need flexibility above all. We think the best way to achieve this is through a target date fund (TDF). As TDFs are actively managed, changes to clients’ schemes can be executed almost instantly. After the 2014 Budget, for example, we were able to implement changes to our TDF strategies within a few hours of our investment team’s final decision on how best to respond – and at no cost to our clients or their members.
At the same time, TDFs give scheme members reassurance that their pension funds are in responsible and responsive hands, rather than being subject to automated trades, as with lifestyle strategies. And while the managers are free to respond to developments immediately, they do so under the oversight of the scheme’s trustees. So, as we enter a brave new world of pension freedoms, we believe that the TDF provides the best route through this uncharted territory.
Your DC members need you!
Despite investing billions into DC pensions every year, few people feel confident that they’ll be able to enjoy a comfortable retirement and, critically, most have no idea when they’re going to retire. Take a look at our video capturing the highlights of our survey surrounding the beliefs and behaviours of DC members to see why your members need you!
A brave new DC landscape
The emergence of a radically changed DC landscape, as a result of the chancellor’s sweeping changes, will see a dramatic reduction in people annuitizing on retirement. Default lifestyle strategies simply won’t be up to the job. Flexible and proactively managed strategies, such as our TDFs and post retirement solutions, are already well positioned and robust enough to ensure the best outcomes for the widest range of member possibilities. Click here to read more.
AllianceBernstein Investment Insight Columns
Cheaper outcome or better outcome (February 2016)
With the new regulations coming into force in June 2016 requiring trustees and governance committees to publish ‘value for money’ statements for their DC schemes, David Hutchins, Head of Pension Strategies at AB explains why we believe this initiative should prompt an overall drive for better outcomes.
Strategies for the road ahead (November 2015)
Given the pension industry’s journey of continuous change, a futureproof default strategy might seem like a distant hope. Many traditional schemes are too unwieldy to adapt, with employers cursing the endless changes they have to cope with. The good news is that innovative and flexible solutions do exist.
If this is the answer, what was the question? (August 2015)
In the financial services industry, companies often spend too much time in ‘answer mode’, where marketing people design product benefits without really asking if their clients’ needs are met. We think an inward-looking approach could jeopardise people’s financial futures.
Protecting the silent majority (May 2015)
Given this March’s Budget announcements, the media’s current focus is on guidance and the secondary annuity market. But we believe the first priority is to look after the silent majority – those 80% of defined contribution (DC) scheme members who are ‘hands off’ when it comes to their retirement planning, and have chosen (or drifted into) default funds.
True Innovation Isn’t Just for the Tech Sector (Dec 2014)
Just as mobile phones have had to evolve radically to meet the needs of the customer, so too must the pensions industry. We need to be able to cater better for people who want to save for their retirement but don’t want to be active participants in the process. We believe that the solution lies in flexible Target Date Funds. They are intuitive to understand and can remain relevant throughout members’ working lives, long into their retirements and potentially even after their deaths.
Building for uncertainty (Sept 2014)
From April 2015, British pension scheme members will have greater freedom in how they access their pension pots. This increased flexibility entails greater uncertainty for providers. Long established in the US, target date funds provide a tried and tested solution. These funds are actively managed to cope with changing economic conditions and allow managers to change portfolios immediately to reflect clients’ interests.
A brave new DC landscape (June 2014)
The emergence of a radically changed DC landscape, as a result of the chancellor’s sweeping changes, will see a dramatic reduction in people annuitizing on retirement. Default lifestyle strategies simply won’t be up to the job. Flexible and proactively managed strategies, such as our TDFs and post retirement solutions, are already well positioned and robust enough to ensure the best outcomes for the widest range of member possibilities.
Don't let change be your enemy (March 2014)
We’re passionate about members getting a better deal from their pension schemes. So it was frustrating, though unsurprising, to find out from our research that many schemes had never changed their default strategy. Often there’s no one responsible on a day-to-day basis for ensuring the strategy is managed according to its objectives. Read on to discover what we believe is a better investment default approach.
Lifestyle vs. Target Date Funds (Dec 2013)
We believe flexible target date funds are a stronger default investment strategy than lifestyle approaches because they provide an enhanced governance framework, more robust risk management, greater investment sophistication and the potential for better performance. In addition, they are easier for members to understand and can be easily updated (without disrupting members) when things change. Tim Banks, Managing Director AB Pensions Strategies Group, outlines the key differences between the two.
Why target date funds are going mainstream (Sept 2013)
The Office of Fair Trading has forecast that over six million of us will be contributing around £11 billion to workplace pensions by 2018. We believe half of that could end up in target date funds. Read why we think their simplicity, flexibility and, ultimately, performance potential is giving them mainstream appeal.
Managing DC portfolios for the future, not the past (June 2013)
At a time of historically low interest rates, renewed inflation threats and unpredictable markets, it’s never been more important that DC savers’ investment strategies are managed to take account of likely future events rather than what’s happened in the recent past, says David Hutchins, our Head of DC Investments.
Members’ expectations are more important than ever (March 2013)
The onset of automatic enrolment means it is vital that defined contribution (DC) pension provision lives up to savers’ reasonable expectations. Unfortunately, says Tim Banks, our Head of DC Sales and Client Relations, we don’t think the standard DC default fund measures up to the challenge.
AllianceBernstein PMI TV webcasts
Tim Banks, Director, UK & Ireland Sales and Client Relations at AllianceBernstein, talks about the changing landscape of DC investment . To view the full webcast click here
Katie Weber, Director of DC Client Relations for UK and Ireland at AllianceBernstein talks about the launch of their ethical target date fund range for the UK DC market. To view the full webcast click here
Tim Banks, Director, UK & Ireland Sales and Client Relations at AllianceBernstein, talks about target date funds. To view the full webcast click here
Target Date Funds resources
Getting the Best of DB Investment Strategies in DC (NAPF News)
The issues facing DC pension schemes look a lot like those confronting their DB counterparts, says Tim Banks, our Head of DC Sales and Client Relations. Getting the best of DB investment strategies in DC means adopting flexible target date funds as the default approach, he argues.
Why target date funds work better for all (Corporate Advisor)
Meeting the reality of modern work means putting a professional fund manager in charge of the default DC pension strategy, while maintaining flexibility about retirement dates, argues Tim Banks, our Head of DC Sales and Client Relations.
The DC Debate (Pensions Week)
Our Head of DC Sales and Client Relations, Tim Banks, discusses some of the latest issues surrounding DC pensions with others involved in the industry.
AllianceBernstein presentation slides
Target Date Funds (TDFs) - the new DC default? (PMI Trustee Seminar November 2011)