Default funds in U.K. defined-contribution plans

A. Byrne, D. Blake, A. Cairns, K. Dowd

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

Most defined-contribution (DC) pension plans give members a degree of choice as to the investment strategy for their contributions. For members unable or unwilling to choose their own investment strategies, many plans also offer a default fund. This article analyzes the U.K. "stakeholder" DC plans, which must by law offer a default fund. The default funds are typically risky but vary substantially among the providers in their strategic asset allocation and in their use of life-cycle plans that reduce risk as planned retirement approaches. A stochastic simulation model demonstrates that the differences can have a significant effect on the distribution of potential pension outcomes.
LanguageEnglish
Pages40-51
Number of pages11
JournalFinancial Analysts Journal
Volume63
Issue number4
DOIs
Publication statusPublished - 2007

Fingerprint

Defined contribution plan
Investment strategy
Pensions
Stochastic simulation
Life cycle
Simulation model
Retirement
Stakeholders
Strategic asset allocation
Defined contribution pension plan

Keywords

  • pension plans
  • investment

Cite this

Byrne, A. ; Blake, D. ; Cairns, A. ; Dowd, K. / Default funds in U.K. defined-contribution plans. In: Financial Analysts Journal. 2007 ; Vol. 63, No. 4. pp. 40-51.
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Byrne, A, Blake, D, Cairns, A & Dowd, K 2007, 'Default funds in U.K. defined-contribution plans' Financial Analysts Journal, vol. 63, no. 4, pp. 40-51. https://doi.org/10.2469/faj.v63.n4.4748

Default funds in U.K. defined-contribution plans. / Byrne, A.; Blake, D.; Cairns, A.; Dowd, K.

In: Financial Analysts Journal, Vol. 63, No. 4, 2007, p. 40-51.

Research output: Contribution to journalArticle

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