Investment policy is crucial to Defined Benefit schemes in two ways. Firstly, investment policy affects the value placed on the scheme’s liabilities, and secondly, it determines the contributions to fund a scheme. This makes investment policy an area of significant importance to sponsoring employers.
Although trustees of Defined Benefit pension schemes are ultimately responsible for setting investment policy, they do have to consult with the employer before finalising their policy. Unfortunately, this often ends up as a cursory exercise with no real discussion or debate.
It’s vital that employers engage in the detail of investment discussions, making sure the policy aligns with the company’s long-term plans.