Pensions - Articles - Hymans Robertson on impact of bond's sell-off on DB pensions

 “Bond yields have headed north. It’s having an impact across the yield curve, from short-dated to long-dated fixed income. What we see now is a turnaround from a few months back when bond markets were reaching peaks and yields were falling off a cliff.

 “Some may be thinking this could provide some welcome relief to pension schemes saddled with large deficits. However, the picture isn’t clear cut. While fixed interest gilt yields have risen slightly, market implied long-term inflation expectations have also gone up. Most pension schemes have a large proportion of pensions that increase in line with inflation – so, for many, the benefit of an increase in yields will have been offset by an increase in long-term inflation expectations. What most pension schemes need is an improvement in fixed interest yields relative to long-term inflation expectations. Unfortunately for those DB schemes whose triennial valuations fall this year it’s still going to be tough.”