Pension Plan Optimization

FIDA - Use Cases for Pension Data In my last article, I explored the impact of FIDA on financial services. Now, let’s dive deeper into how pension data is already being used across the EU to create real value. Pension data isn’t just numbers on a page—it’s the key to smarter financial decisions, better retirement outcomes, and a more transparent financial ecosystem. With FIDA and Open Finance, this data is finally becoming more accessible. For context, Insurely currently helps over 1m europeans to understand their pensions per year with Open Finance. 1️⃣ Full Pension overview & gap analysis Aggregating pension data across different providers gives customers a clear view of their projected retirement income and assets, identifying potential gaps in savings and outcome expectations. 👉 Financial firms can offer personalized recommendations to close pension gaps and optimize contributions, as well as increase knowledge about long term savings. 2️⃣ Pension consolidation & transfers Customers can easily find forgotten pension savings across asset managers, and consolidate them into more cost effective alternatives, optimizing fees and investment performance. 👉 Pension providers benefit from increased customer acquisition and stronger long-term relationships. 3️⃣ AI-Powered, self-service pension advice With real-time pension data, AI can deliver personalized suggestions for contributions, investment strategies, and withdrawal planning. 👉 Improves financial preparedness by helping customers maximize their retirement savings. Lowers cost of pension advice to the retail market for financial firms. 4️⃣ Retirement planning with Advisors Customers can securely share pension data with financial advisors, allowing for more precise and informed retirement planning. 👉 Enhances the quality of advisory services, leading to better retirement outcomes for both firms and customers. 5️⃣ Proactive Pension contribution adjustments With real-time access to pension data, providers can proactively suggest adjustments based on income changes, life events, or market conditions in order to make sure your retirement outcome is as expected. 👉Helps customers stay on track for a secure retirement based on the individual need. 6️⃣ Pension trackers - that also works cross border With a standardised European data exposure, every citizen will have access to their occupational pension data from all EU countries. This can easily be used to build non-profit pension trackers cross-border and nationally. 👉 Opportunity to detach ownership of pension trackers from local industries to ensure pension trackers are not limited These use cases show that FIDA is more than just a regulatory framework—it’s a foundation innovation, improving retirement planning for millions. And the best part? The same dataset—“Customer Data” as defined in the FIDA draft—enables all of them. How do you see pension data transforming financial services in the next five years? Let’s discuss!

“I’ll sort it later. I’ll be fine.” Those were Jeff’s words until he saw his projections…😳 This was Jeff’s mindset when it came to his pension. At 30, he was automatically enrolled in his workplace scheme, putting in £250 a month. His pot sat at £30,000, and he assumed that was good enough. Fast forward to 40, and his pot had grown to £100,000 but he had never really paid attention to it. Then, at a work event, a colleague mentioned they’d reviewed their pension investments and were targeting 8% growth per year. Jeff was curious so he checked his own pension statement. It had been growing at just 4% per year. The wake up call: Jeff ran the numbers. If he stayed in his default pension fund, his pot at 65 would be worth £420,000. His colleague, who had taken advice and optimised their pension, was on track for £1.1 million. Same contributions. Same starting balance. But a £700,000 difference 🤯 That’s when it hit Jeff. How much money had he left on the table because he kept saying, “I’ll sort it later”? The fix - taking control of his Pension 🙌 Like many people, Jeff had fallen into a common trap: assuming his pension was working for him, without checking. He realised he had never: ❌ Assessed his risk level—was he being too cautious for his age? ❌ Reviewed his investment strategy—was he missing opportunities for growth? ❌ Considered his lifestyle in retirement, what bucket list things does he want to do? ❌ Thought about his retirement goal - was he even on track? With expert guidance, Jeff took action: ✅ Moved to a diversified portfolio suited to his long-term goals ✅ Increased contributions through salary sacrifice, boosting his pension while reducing tax ✅ Ensured he was maximising employer contributions The Outcome: A smarter future Jeff’s new strategy put him on track for over £1 million in retirement savings without drastically increasing his contributions. It wasn’t about paying in more. It was more about making his money work harder. The biggest lesson? “Later” is the most expensive word in finance. Start now 👊

As we navigate our careers and plan for retirement, understanding how to effectively manage pension savings becomes crucial. A lifestyle strategy is key to this process, allowing for a gradual shift in your investment focus as you age. Rather than sticking to high-risk investments like equities, which can be volatile, consider how de-risking can protect your savings while still enabling growth potential. Typically, this de-risking starts five to fifteen years before your expected retirement age, transitioning your portfolio from a significant equity exposure to a more balanced allocation of bonds and cash. This shift helps shield your savings from sudden market downturns, ensuring you have a stable foundation as you approach retirement. However, it’s essential to recognise that a one-size-fits-all approach may not suit your individual goals. If you plan to retire later or earlier than expected, your investment strategy should reflect those changes. Regularly revisiting and adjusting your strategy allows you to align your investments with your risk tolerance and financial objectives. Consider the impact of inflation on your pension savings. While bonds and cash provide stability, they may not yield returns that outpace inflation, potentially eroding your purchasing power in retirement. A blended approach—maintaining some equity exposure for growth while keeping a portion in lower-risk assets—can offer a balanced solution. Taking an active role in managing your pension and staying informed about your options is vital. Whether you prefer a lifestyle fund, a growth-oriented strategy, or a customised allocation, being proactive will help you achieve the financial stability you deserve in your later years. Planning for retirement can feel overwhelming, but with the right guidance and a tailored approach, you can secure your future. Let’s take charge of our investments today and build the retirement we envision.

Thinking Out of the Box: Let me start with my conclusion and then explain my logic. Given the recent increase in funded status for Public Pension plans, it is my humble opinion that public plans are over-allocated to public/private equity. The average pension plan has ~60% exposure to public/private equities. Public plans actuarial return requirement has fallen to ~6%, the rate required to fulfill their pension distributions, while yields have risen and private credit has become a more optimal solution. Let’s unpack/debate 3 key points: 1. If a pension plan has a 6% return requirement and Private Credit can deliver 11-12% consistently year-after-year, then why not flip the script, and have 50% in Private Credit, and 10% multi-asset public credit to meet liquidity requirements - not 60% allocation to equities. Private Credit has evolved, it’s a defined asset class (prior to 2010 it was not). Muscle memory dictates that equities is the way to tilt for success. 2. Shockingly, the S&P 500 has compounded only +5% IRR per annum since January 1, 2000, a much lower than most think since it has generated a 20%+ IRR in 2023/24. There has been only 2 other times in past 100 years when equities had back-to-back 20%+ annual returns. As we close in on the first 1/4 of this century, equities have delivered a mere 5% annually. Traditional PE (top-quartile) has done well, while growth/venture have under-performed PE, except for the top 10% of this cohort. While I remain constructive for equities, one can argue that equities are rich—see chart below, while the bigger point is that fixed income is a better match v. fixed liabilities. 3. Insurance companies are highly regulated by the NAIC/state commissioner who require insurers to invest in fixed income to match asset vs. liabilities. In recent years, insurance companies have begun to invest more heavily in private credit given the meaningful yield pick-up vs. public fixed income. Led by the brilliant minds at Athene, other insurers have adopted this model of leaning into private credit. Insurance companies can allocate ~15% to private credit, only limited by the capital requirement imposed by regulators. Pension plans do not have this constraint and have significantly greater flexibility. In contrast, insurance companies also have liabilities to fulfill, yet they have just ~5% equity market exposure (percent of assets held by general account). Given the volatility of equities vs. the higher-for-longer return profile for private credit, capital allocators may want to consider these 3 key points (above). Public pension funds have an amazing model, staffed by brilliant CIOs with their strong investment staff(s). Partnering with their consulting firms, plan sponsors have a chance to flip this model, increasing the allocation to private credit that may be a better match vs. their liabilities. Is it time to rebalance?