The further rise in gilt yields over the last week represents a trend, rather than a blip, and trustees need to ensure that they de-risk schemes in the months to come. That’s according to Capita Employee Benefits whose director of actuarial, investment and DB consulting, Julie Stothard, warns that schemes need to be prepared to act quickly.
She commented: “The last week saw a rise of approximately 0.2% in gilt yields but this is merely the continuation of a trend observed over 2013. Gilt yields have now risen by approximately 0.8%-1.0%pa since the key valuation dates of 31 December 2012 and 31 March 2013. We believe that this trend will continue and that a number of de-risking opportunities will arise for those best prepared to act.”
“While our Chief Economist, Albert Küller, would not go so far as expecting a return to pre-crisis yield levels in the near future, we do believe that the combination of the Bank of England’s continued loose monetary policy, the recent introduction of forward guidance on interest rates and the recent sharp increases in the manufacturing and construction Purchasing Managers’ Indices all support our prediction that longer-dated gilt yields could continue to rise.”
However, the consultancy warns that opportunities will be lost if trustees don’t ensure they are ready to act swiftly.
Julie continues: “Trustees should use this window of opportunity to maximise their data quality and to ensure that they have the tools to monitor the movement of their scheme’s assets and liabilities. This preparation will pay significant dividends: they will be able to move quickly and at the best possible price to take full advantage of the opportunities in the market. The difference between being prepared and unprepared could have significant cost implications for the scheme.”
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