Simplified solution helps small and medium-sized defined benefit pension
plans manage interest rate risk
MONTREAL, Feb. 4, 2013 /CNW Telbec/ - The Standard Life Assurance
Company of Canada ("Standard Life") announced today that its target
liability bond funds have attracted just under $50 million in initial
investments from three existing clients, including CCH Canadian Limited
and CYTEC Canada Inc. These funds are designed to respond to the needs
of defined benefit (DB) pension plans to de-risk their portfolios. They
leverage the expertise and quantitative research capabilities of
Standard Life Investments Inc., an affiliated company of Standard Life,
which introduced a liability-driven investment (LDI) solution for large
pension plans in 1998.
LDI solutions represent a clear departure from the traditional, balanced
approach for managing DB pension plans that focuses on the return of
assets, but ignores the interest rate risk inherent to liabilities
which is critical to long-term pension plan solvency. Standard Life's
new solution is particularly attractive to small and medium-sized
pension plans whose financial resources would not normally allow them
to access the sophisticated options they need to meet existing and
"Whether they are large or small, times have changed for DB pension
plans," says Michel Fortin, Senior Vice-President, Marketing and
Customer Solutions. "Many plans are approaching maturity and, as
pressures on solvency mount due to historically low interest rates, a
new way of thinking is required to ensure plan sponsors meet payout
obligations. Our liability-driven investment framework offers an
innovative and more effective solution to manage interest rate risk
without sacrificing growth potential."
Standard Life's simplified LDI solution is a series of long, mid and
short-term liability government bond funds that corresponds to specific
Canadian pension plan profiles representing different combinations of
active and retired employees at three stages (young, mature and
retired) of the pension plan life cycle:
Long-term liability government bond fund: demographic profile with a majority of
active employees; duration of 18 years.
Mid-term liability government bond fund: demographic profile with a majority of
retirees; duration of 13 years.
Short-term liability government bond fund: demographic profile of 100% retirees;
duration of 7 years.
Plan sponsors can allocate assets between the three funds and base
investment decisions on the percentage of liabilities associated with
active and retired plan members, on the duration of liabilities or on
expected cash flows.
Investment management fees for Standard Life's new target liability bond
funds are lower than actively managed traditional bond funds. The new
funds are managed by Standard Life Investments Inc.
About Standard Life
Standard Life plc is a leading long-term savings and investment company
headquartered in Edinburgh, Scotland. Standard Life has around six
million customers worldwide and operates in the United Kingdom, Europe,
North America and Asia, and globally with Standard Life Investments
In Canada, Standard Life has been doing business for almost 180 years.
It operates under Standard Life Financial Inc., which wholly owns The
Standard Life Assurance Company of Canada and Standard Life Mutual
Funds Ltd. It is Standard Life plc's largest operation outside the UK
with about 2,000 employees. It provides long-term savings, investment
and insurance solutions to more than 1.4 million Canadians, including
group retirement and insurance plan members.
As of September 30, 2012, Standard Life plc had C$337 billion in assets
under administration, including C$44 billion in Canada through Standard
SOURCE: STANDARD LIFE
For further information:
514-499-7999, ext. 8150