The increases in gilt and swap yields and a decrease in inflation expectations in December largely offset the deterioration in funding levels seen over October and November 2021
Simon Taylor, Partner at Barnett Waddingham, said: “The pendulum of the DB End Gauge has swung back to a promising position for FTSE350 DB pension schemes, with the average scheme now on track to buyout in a decade. The increases in gilt and swap yields and a decrease in inflation expectations in December have offset the worsening in funding levels seen in October and November, which had pushed the average time to buyout up to around 11.4 years.
“This swing is evidence of the fact that small changes in key financial indicators can have a big impact. It is also a welcome reminder for those managing DB schemes to be astute in their reading of financial markets – there is a lot of noise around short-term high inflation and imminent base rate rises, but long-term inflation expectations actually decreased in December. As with all investments, it is important to take a long-term view; whilst it is vital to monitor movements in funding levels, journey plans should not deviate unless there is evidence of a fundamental change.”
BW DB End Gauge
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