The two charts below (data sourced from the PPF website) really tell you everything you need to know about risk management of UK pension funds over the last 10 years.
Assets have grown steadily from c£700bn to c £1.3trn, although admittedly a very large part of this (possibly all of it) is due to contributions. On the risk side, there has been surprisingly little volatility, bar a significant bump in 2008 the line tracks steadily upward with a modest level of annualized volatility of 5%p.a.
On the basis of that, you might think that all was fine in the world of UK pensions.
Sadly, the picture changes when you overlay the liabilities.
As well as ballooning over the period in question, it’s the risk element that is most interesting. The annual volatility of the liability figure is around 14%p.a., contributing the lion’s share of the overall funding level volatility of c12%.
I don’t think I’m overstating things with the statement
“You can’t effectively risk manage a UK defined benefit pension fund without controlling the liabilities”