In response to continuing deficits in UK defined pension benefit schemes since the start of the millennium, various parties have asked the UK Government to allow pensions schemes to calculate liabilities using a smoothed average of bond yields over several years. This paper explores the reasons for this request, and looks at multiple evidence of what impact, both beneficial and potentially risky, such a move could have.

DC schemes have some substantial weaknesses, and a continuation of current policies will probably lead to another pensions crisis in a few decades.

The trend towards defined-contribution pension provision in the UK seems to be irreversible. Most private sector employers with defined-benefit schemes have either closed them to new entrants or wound them up. Virtually all new scheme established have been defined contribution, and the introduction of the government-mandated National Employment Savings Trust will increase the number of workers with defined-contribution benefits.

The UK's defined benefit pensions industry makes widespread use of pooled investment vehicles which are provided by a large number of fund management groups. In this paper we provide the first comprehensive performance analysis of these funds.