Following its arrival on the corporate DB scene around 2008, the concept of de-risking glide paths spread remarkably quickly. Although pension plans are often seen as conservative and slow to adopt new ideas, de-risking glide paths were widely embraced almost immediately.
We have reached the point where most frozen pension plans have adopted a de-risking glide path, and it is those who have not done so that find themselves in the minority.
This paper discusses:
- A brief history of glide paths
- Why (and when) de-risking glide paths makes sense
- Asymmetric surplus risk
- Design considerations