Mercer has launched a real-time daily-funding monitoring system as part of its drive to offer more effective risk management services to defined benefit (DB) pension schemes.
The Funded Status Monitor (FSM) provides employers and trustees with a daily update of their pension scheme’s asset and liability values.
It allows organisations to work in partnership with their trustee boards to monitor and project the financial position on assumptions that are appropriate for their needs.
Mercer will enter periodic scheme asset and liability data into the system, which then provides a daily update based on relevant market indices.
Employers and trustees can see the funding position and cost of accrual on different measures, such as accounting, funding, secondary funding and least risk, and can then have the ability to vary the key financial assumptions. They can also understand the approximate impact of high-level changes to the investment strategy, giving insight into the impact of potential risk-management strategies.
The system also offers a forecast module, which aims to support employers and trustees in considering their recovery plans for pension scheme valuations. It provides a projection of the funding position of up to 30 years, which is updated on a daily basis.
Employers and trustees can model different future scenarios, with the ability to vary financial assumptions and cash-flow data in each future year. The module can also be used to see the impact of making a change to the pension scheme’s structure, such as closing it to future accrual.
Alan Baker, partner at Mercer, said: “For many schemes, a quarterly update is not enough because funding levels can change markedly in a three-month period.
“FSM allows those involved in the management of a DB scheme to have oversight of their†funding position to be able to plan and monitor accordingly.
“We have signed up more than 20 UK organisations to FSM so far and anticipate further interest as the de-risking of DB schemes moves up the corporate agenda. This is a really practical and easy-to-use system designed to improve awareness and understanding of pension scheme volatility.”
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