Jaime Norman, Senior Actuarial Director at Broadstone, commented: “Geopolitical uncertainty remained the dominant market feature through May as the conflict in Iran dragged on despite continued negotiations for a longer-term peace treaty. Nonetheless, easing inflation expectations and reduced confidence in interest rate rises from Central Banks supported easing bond yields while equities performed strongly. The passing of the Pension Schemes Act opens up further endgame opportunities for pension schemes alongside a busy insurance market as trustees look to secure the best possible outcomes for their members. The continued strength in funding levels will only increase the range of available options for trustees and we would expect a busy half-year of de-risking ahead.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher, said: “The latest data from the PPF 7800 Index shows the strength of funding across the UK’s defined benefit pensions sector. Many schemes are standing up to the headwinds despite market volatility, higher inflation expectations and wider credit spreads at the start of the year. However, strong funding positions should not be mistaken for a simple endgame. The pensions market is undergoing one of the most significant periods of change since the introduction of auto-enrolment. The sector is increasingly moving toward a time of managed run-off, and strategic decisions around endgame planning and member security are coming to the fore. With options for well-funded schemes expanding, from buy-ins and consolidation to run-on and potential surplus release, strong governance is essential. The Pensions Regulator’s forthcoming guidance on surplus extraction will be closely watched, and schemes should use this time to ensure their governance, investment strategy and endgame planning are fit for the next phase of DB pensions.”
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