More than ever before pension funds have expressed the desire to have more insight in the strength of available control resources. During the ALM project we work together with the pension fund board to manage the various pension risks, whereby the interests of all stakeholders is taken into consideration.
Under the Pensions Act pension funds are obliged to perform an ALM study at least once every three years. The objective of Asset Liability Management (ALM) is obtaining insight in the possible financial developments and risks of a pension fund, and with that finding the optimal investment policy. Significant risk variables are for instance:
- the probability of a reserve deficit;
- the probability of underfunding;
- the probability of that supplements cannot be paid (in full); and
- the probability that the uniform contribution rate appears to be insufficient.
ALM quantifies these risks and shows under which circumstances they manifest themselves. ALM does not answer the question what the best investment mix is. Insight is given though in the possible consequences of choices regarding the policies of contributions, supplements and strategic investment.
We see ALM as a process that is jointly established with the pension fund board. In our experience the board management gains better insight in the cohesion of the various risks of the pension fund by this interaction. Through our unique approach the ALM study is a major contributor to a consistent and sound long-term policy.