Designing practical life-cycle pension solutions

All come with a complexity requiring expertise in finding solutions that can stand the test of time – and that could be over many decades. Creating an efficient solution depends on the client’s investment beliefs and appetite for the complexity of pension administration. There are three main types.

• Life-cycle funds, which aim to generate returns over an individual’s entire working life, require many different funds to work properly.
  

• Return and matching funds can be used to lower the number of funds used in the plan, but these rely more heavily on administration to manage the riskier asset allocation that results.
  

• Direct fund investments, in which the pension scheme handles the fund choice itself, is another way of doing it.
  

So, which is the best path? In this article – the first of our Defined Contribution Pensions Series publications – we describe the advantages and disadvantages for different types of these different life-cycle investment solutions, including the administrative perspective.