Investment - Articles - Rate rise could remove pension scheme long term liabilities


XPS Pensions’ DB:UK tracker has estimated that a further £100bn* could be removed from the long-term liabilities of UK pension schemes if longer-term gilt yields were to increase in line with today’s base rate change. This would be in addition to the £380bn already removed from the 0.65% increase in base rates since 16 December 2021.

 This will be welcome news for DB pension schemes that are not fully hedged, whose funding positions may well improve off the back of this announcement depending on the response of investment markets. A rise in gilt yields coupled with the prospect of stable long-term inflation usually spells good news for pension schemes.
 
 Charlotte Jones, Senior Consultant at XPS Pensions Group, commented: “Gilt yields have been tracking base rates and rising steadily since December 2021 to reach highs that we’ve not seen since early 2019. In liability terms, this should be good news; rising gilt yields generally mean that the funding positions of schemes which are not fully hedged will improve. However, in the current environment a stable or improved funding position is not guaranteed - with the conflict in Ukraine and inflation concerns continuing, the market remains volatile, keeping trustees and their advisors on their toes”
 
 *Movement in liabilities based on gilt yield movement only, no allowance for changes to inflation or market value of assets. This does not allow for any offsetting reduction in value to hedged assets.
  

Back to Index


Similar News to this Story

Paper exploring the alternative risk transfer market
Hymans Robertson has published its new paper “A Closer Look at Capital Backed Journey Plans” which shows that Capital backed journey plans (CBJP) are
RLAM abstains on Shells climate transition plan
Commenting ahead of Shell’s AGM on Tuesday 17th May, Carlota Garcia-Manas, Head of Engagement at Royal London Asset Management (RLAM), said:
ESG factors top concerns of investors
Research finds significant generational divide in attitudes to ESG Investments. Majority of all age groups want to see younger generation get better f

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.