A gilt complex
A slump in UK gilt yields in January has left pension funds with a dilemma. Should they buy bonds at any price to match assets and liabilities? Some analysts have suggested pension funds should consider alternatives. Alexander Campbell reports
Panic is probably too strong a word, but the UK pension industry is certainly experiencing a great deal of anxiety. With the yields on long-dated gilts slumping in January, pension funds were hit with a painful double whammy.
Since the adoption of FRS17, UK funds have had to calculate their liabilities using a discount rate based on bond yields. As a result, the drop in yields sent liabilities soaring, with some analysts estimating that around £30 billion was added to UK firms' deficits
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Debt management
White paper: Sovereign debt contracts and the effects of recent case law on bondholders
This white paper deals with the implications of the case of NML Capital Ltd v Argentina. Although the decision applies specifically to sovereign debt contracts governed by New York law, it could have an impact on bondholders whose debt is not governed by…
Debt mutualisation: Lessons from the US
Debt mutualisation lessons from the US
IMF looks to strengthen Asian ties to combat global economic crisis
The IMF is looking to work with Asian countries to lessen the impact of the global crisis on the region, says David Lipton, IMF first deputy managing director
OECD debt offices call for derivatives collateral debate
New report calls for debt offices to weigh the pros and cons of two-way collateral and clearing
Profile: Daniel Gros on political risk and Europe's debt crisis
Time for a European Monetary Fund
Market fragmentation "inevitable" if CPI-linked gilts issued, says DMO chief
Key question is to what extent fragmentation could affect liquidity of new instrument, says chief executive of the UK’s Debt Management Office
Last-minute US debt ceiling rise leaves world reeling
Debt ceiling deal will not restore investor confidence immediately; China still looking to diversify reserves away from dollar; credit rating agencies cautiously affirm top ratings
Pension funds urge US Congress to act fast on debt-ceiling deal
Pension funds and investment firms highlight inflation, interest rate and currency risks of US default in open letters to President Obama
Most read
- Top 10 operational risks for 2024
- Japanese megabanks shun internal models as FRTB bites
- LCH issued highest cash call in more than five years