We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".

Continue

News/Analysis

Twitter board

Follow us
  • My week on Twitter 🎉: 2 Mentions, 3.3K Mention Reach, 5 Likes, 6 Retweets, 7.76K Retweet Reach. See yours with… https://t.co/IZfviidt4H16 hours ago
  • Friday View: Trustees feel the heat over climate change - bankers' pensions back in black - TPR suspends trustee -… https://t.co/kUKa8QUF9w3 days ago
  • Increased regulatory oversight will be risk-based, TPR keyperson will meet schemes deemed riskier several times a y… https://t.co/wUiKPGESaU5 days ago
  • Lesley Titcomb, TPR chief executive says change is on its way, the regulator will increase oversight between valuat… https://t.co/Wu8Pv6TfqS5 days ago
  • Join us and @AonRetirementUK on the 4th of July at the luxurious Victorian Bath House featuring educational presen… https://t.co/r1abr8Qls06 days ago
  • DWP wants trustees to feel the heat over climate change https://t.co/bs25DvyWGF #ESG #climatechange https://t.co/dZEXB0g8a46 days ago
  • My week on Twitter 🎉: 3 New Followers. See yours with https://t.co/mCw3VcMQGw https://t.co/3kEHNr3xyz7 days ago
  • Friday View: Heathrow's ÂŁ325 million buy-in - Auto enrolment for the gig economy - Brunel opts for ACS structure -… https://t.co/vsnML1Vzb510 days ago
  • Pimlico Plumbers- Could gig economy workers be auto enrolled? https://t.co/qgrlWxMUW8 #gigeconomy #autoenrolment… https://t.co/wnDH18iPxG10 days ago
  • RT @eVestment: Workers in the #UK are open to increasing their retirement savings and tend to place greater emphasis on workplace #pensions…11 days ago
  • The June issue of portfolio institutional is now out: Featuring our take on #carillion and lessons for trustees as… https://t.co/yC2PNgoaPr12 days ago
  • RT @PensionsSion: Aon's very own John Belgrove shares his views in this piece. Worth reading... https://t.co/VYEJWjAU3z12 days ago
  • My week on Twitter 🎉: 2 Mentions, 3.29K Mention Reach, 2 Retweets, 3.27K Retweet Reach. See yours with… https://t.co/MeoES7Ch3L14 days ago
  • Friday View: South Yorkshire hedges pension risk- Recruitment execs face prison over pension scam - Johnston Press… https://t.co/9fV8Z48WtF17 days ago
  • RT @cfjescott: A recent piece of mine on the @CMAgovUK investigation into investment consultants in @portfolio_inst #investment https://t.c…19 days ago
  • Our ESG Roundtable: Better Long-term outcomes? Available to download now https://t.co/o7T8kWSwWY https://t.co/oHs4VlRK9E21 days ago
  • Active vs Passive : In 2016 investors withdrew around $285bn from active funds and pumped almost $429bn into passiv… https://t.co/tjpxhTxW5Z21 days ago
  • RT @WhtstheDiehlio: .@AitkenRL spoke with @graniteshares CEO Will Rhind about the ongoing active vs. passive debate. Check out their though…21 days ago
  • Green is the new black. A record sum is expected to be raised under the green bond banner this year, but is it doom… https://t.co/JYP8k0ZfZk23 days ago
  • Our Cover Story! Property: Solid Returns - Low gilt yields are forcing schemes to pile into bricks and mortar. Mark… https://t.co/9nyjFp0Z4R23 days ago

Pensions

Rate rise forces risk review

Rate rise forces risk review

Mark Dunne
Friday 3rd November 2017

November’s interest rate rise will do little to improve pension scheme valuations, but managers should prepare their portfolios following a pessimistic economic outlook by the Bank of England.

The cost of borrowing was hiked by 0.25% to 0.5% on 2 November, the first rise for a decade. Indeed, 10 Downing Street has been home to three prime ministers since rates were last raised in July 2007.

The move was expected after Bank of England governor Mark Carney (pictured) dropped hints to a panel of MPs in October after inflation, spurred on by a weakening pound, exceeded his 2% target to reach 3%.

Better-than-expected economic growth in the third quarter and low unemployment also convinced seven members of the Monetary Policy Committee to vote for an increase in the cost of borrowing.

But when it comes to economic growth, it could be a different story next year. The Bank of England’s analysts expect the UK’s GDP to expand by 1.7% in 2018, lower than its previous 1.9% forecast.

The rate rise will have limited impact on pension scheme liabilities, according to Russell Investments managing director of client strategy David Rae.

“The focus should remain on the risks within the asset portfolio and the risks associated with any potential economic slowdown,” he added.

The governor admitted that further rises are on the horizon to tackle inflation, a result of the UK’s decision to leave the European Union.

A gradual rising rate environment, according to Goldman Sachs Asset Management head of UK and Irish institutional business David Curtis, could prompt pension schemes to reassess their investment approaches.

“We believe that for trustees and their advisers, a period of rising rates puts into sharp focus the need to consider long-term risks of meeting liabilities as well as putting a greater emphasis on taking a dynamic approach to managing growth assets.

“Challenges remain for the economy with possible declining business investment and slower migration flows as a result of Brexit uncertainty – both factors that could weigh on the growth and inflation outlook for the UK,” he added.

“Geographical diversity, therefore – ensuring that schemes’ portfolios are not overly biased towards domestic securities – should be high priority when making allocation choices.”

0

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!

Friday View

Friday View

How investor action helps cut CO2 emissions