Commenting on the past week and impact on the pensions and bond market, John Dickson, Senior Partner, Hymans Robertson says:

“As we approach the end of one of, if not the most, volatile weeks UK bond markets have ever experienced, it doesn’t feel like “unprecedented” quite does it justice.

“In my 30 years in the industry, I’ve experienced at least seven serious crash/systemic situations, the most recent of which, until last Friday, was the Covid19 pandemic. No two systemic events are ever the same, and that could not be more true when comparing the events of the global pandemic, which the world continues to recover from, and the very UK specific and systemic events of the last week or so.

 “It’s hard to see how a UK private sector defined benefit pension scheme won’t have been impacted by the magnitude, speed and volatility of change experienced in the UK gilt markets over the last seven days. Even those schemes close to achieving their long term objectives have not been immune to these market events, with the rapid drying up of liquidity putting hedging strategies under extreme pressure.

“The speed at which Trustees have had to act, and the complexity of the decisions they have had to make, will have been a challenge that even the longest serving Trustees will unlikely have had to tackle before. Whilst the temporary liquidity provided by the Bank of England on Wednesday this week has been a welcomed reprieve for Trustees to take stock, it is just that, temporary. We remain fully committed to supporting our clients through the next stage and wave of challenges which will in time turn from short term maintenance to long term strategy and journey planning from here in the new “normal”.”