“From February’s Russian invasion of Ukraine to the gilt market meltdown in October, 2022 pension schemes find themselves in a much healthier position than at the start of the year”. So here’s to economic incompetence and state sponsored terror https://t.co/qtQTHDerbI
— Henry Tapper (@henryhtapper) January 4, 2023
Russia’s invasion of Ukraine has done no good to anyone.
Let’s take a step back. Russia’s invasion of Ukraine pushed up commodity prices, resulting in deprivation around the world and increasing the cost of borrowing in the UK. UK pensioner may have seen the valuation of their liabilities decrease by 35% but they haven’t seen their pensions increase in line with inflation (unless in the public sector).
The suffering from war in Ukraine is not mitigated to any degree by the increased solvency of UK pensions because the long gilt rate increased by 3%. Let us not conflate accounting with human misery.
Trussnomics has led to misery for millions – including pensioners
Let’s take another step back. The moron premium we continue to pay because of Truss’ economic incompetence is in no way justified by its keeping gilt rates 1% higher than they should be and therefore keeping pension schemes in technical solvency. Her folly has made it harder to support the old, the sick and the vulnerable. It has meant less money for the NHS , less money for hardship payments and less money to build back Britain after the idiocies of the past 7 years.
Anyone who links the misery created by these two political events to a supposed improvement in pension funding ignores the cost to the global economy of the Ukrainian economy and the needless immolation of Britain’s economic credibility by a couple of crazies.
Pensions are the poorer for Putin and Truss.
The asset base of many British Pension schemes has been eroded by the real impact of war and economic error. The money lost in the firesales resulting from collateral calls will not come back – even if the hedges stick (and many are lost). More importantly , the resulting recession will depress the capacity of Britain and other countries to grow their economies generating the wealth that will provide the real returns needed to pay our pensions.
As for the impact on those without the luxury of a defined benefit workplace pension, the impact of the war in Ukraine has been to drive down world stock markets, weakening the capacity individuals have to purchase annuities or set drawdown at adequate levels. The rise in gilt rates has resulted in a fall of around 30% in gilt and bond funds that are supposed to provide security to those close to the end of their work life. DC Workplace Pensions are typically 20% worse off than this time last year.
Even those who will this year enjoy the security of an inflation linked state pension have seen the tax-payer covenant for the triple-lock diminish as Government debt increases and tax-revenues falter. Recession is no-one’s friend but the pension accountant’s.
This headline brings shame on us if we attribute the events that drove yields up as a victory for pensions.
The final paragraph of the article to which the above is the headline reads
XPS Pensions Group actuary Tom Birkin said: “From February’s shock Russian invasion of Ukraine to the gilt market meltdown in October, 2022 has been a year of seismic market movements and the upshot for pension schemes is that most find themselves in a much healthier position than they were at the start of the year.”
Some things are best unsaid
