Pensions - Articles - Latest pension funding update - JLT

 As at 30 November 2015, JLT estimates the total DB pension scheme funding position as follows:
 
 Charles Cowling, Director, JLT Employee Benefits, comments:
 “Deficits have widened again this month as the Bank of England has once again pushed back expectations for a rise in interest rates. Continued mild deflation is certainly not putting any pressure on the Bank to raise interest rates any time soon, nor do the economic gloom in Europe and the continued sluggishness of emerging markets.

  

 “This is hurting UK pension schemes. In the last two months alone, the outlook for interest rates 18 months hence as reflected in market prices has fallen 0.5%. This has serious consequences because UK pension schemes still have a huge exposure to interest rates despite their significant activity in LDI and other hedging investment strategies. In effect, the UK pensions industry continues to take a very large position - some might even call it a bet - that interest rates will rise faster than the market expects. Trouble is, this is a position which month after month, since the start of the financial crisis, pension schemes have got wrong. Maybe it’s time for pension schemes to bite the bullet and stop betting against markets.”