Commenting on today’s 0.75% interest rate rise from the Bank of England, Elaine Torry, Co-Head of DB Investment:

“For pension schemes, an increase in short dated base rates in isolation should not be too much cause for concern. However, the rationale for the increase, coupled with other upcoming fiscal announcements could cause a ripple effect up the yield curve. If this happens, the rate rise could be a contributory factor to certain schemes being faced with fielding a further round of collateral calls, whilst others may find themselves in the position to be able to afford to de-risk and lock in funding level gains. However, the challenge that is overshadowing many schemes at the moment is the overarching balancing act that is having to be performed between managing risk and sticking to strategy versus the practicalities of raising cash to field collateral calls within the required timescales.

“With November’s autumn statement a fortnight away uncertainty remains for many. DB Trustees must evaluate whether this interest rate hike, and subsequent knock-on effects, present an ironic opportunity to take advantage of improvements in funding positions or whether running to stand still will continue to dominate time and attention.”