Constructing the Ideal Defined Contribution Plan

How would you design the ideal workplace defined contribution (DC) plan if you were freed from existing laws, structures, history and standard industry practices? That is the question Northern Trust put to a group of the largest DC plan sponsors and several of the most influential U.S. investment consultants in its recently released research study, “The Path Forward: Designing the Ideal Defined Contribution Plan.”

In general, the plan sponsors and consultants interviewed for the study were in broad agreement about the basic characteristics of the ideal DC plan. Study participants described the ideal DC plan as simple, automatic and cost effective.

In this ideal plan, DC plan participants would be: required to participate; able to contribute post-tax dollars without restriction; and prevented from taking loans.

DC plan sponsors would bear responsibility for: contributing to employees’ plans; sharing decision-making power with participants; and providing high levels of fee transparency.

In certain areas, plan sponsors and consultants had differing views regarding enrollment, contribution levels and investment options. Plan sponsors suggest broader investment line-ups while consultants promote greater levels of corporate paternalism regarding participation and investment decision-making.

Alternate and Hedge Fund UCITS See Strong Growth

Hedge fund and alternative investment strategies within European UCITS funds now exceed $160 billion, according to global fund research firm Strategic Insight, an Asset International company.

Strategic Insight’s new study, “Alternative and Hedge Fund UCITS in the Next Decade,” was commissioned by the Association of Luxembourg Funds Industry with the support of Luxembourg For Finance. The study also found that net inflows to such products reached $37 billion during 2010 through October, a 70% increase over the prior year. Alternative UCITS funds account for 15% of total net inflows into all long-term UCITS funds.

According to Strategic Insight, most of these products represent hedge-style strategies adapted to the growing need for absolute return solutions. New alternative UCITS launched this year have already captured $8 billion. Luxembourg domiciled products account for almost half (49%) of total alternative UCITS assets and flows this year, and 45% of the number of funds.

To read the full report from Strategic Insight, visit sionline.com.

Pension Trustees Question Advisers’ Decisions

A new Mercer U.K. survey has found that more than 60% of firms either do not have a communications policy for their defined contribution (DC) schemes or do not document it.

According to the survey, 68% of survey participants rated “limited member understanding” as one of the greatest challenges currently faced by DC plans, and nearly 90% want to improve member education and understanding in the next 12 to 24 months.

The survey also found that 34% of sponsors have no formal communications objectives for their DC plan and 46% have no defined success measures. To read the full survey, visit uk.mercer.com.

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