Defined Benefit Pensions Outlook – Q1 2022
UK Defined Benefit (DB) scheme funding edged higher over the last quarter, to 108%.1 Liabilities and assets both rose around 3% in aggregate, with growth asset returns marginally outpacing the impact of lower bond yields.
However, there is significant dispersion with 41% of schemes remaining in deficit¹. This dispersion is likely to have been exacerbated by the sharp rise in interest rates and fall in equity values following year end.
We expect significant de-risking activity in 2022, as schemes progress towards their long-term objective.
In our latest outlook we discuss:
- The de-risking outlook for Defined Benefit pension plans
- Our current views on global market conditions and key factors influencing a CDI (Cashflow-Driven Investing) strategy
- The outlook for key fixed income, private markets and alternative strategies
Footnotes
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1 Source: Pension Protection Fund (PPF S179 basis), December 31, 2021
Investment risks
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Alternative investment products, including private equity, may involve a higher degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.
Important information
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Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
