Gilt yields to hit 4.5% by 2025: PricewaterhouseCoopers

The firm released statistics showing that a gradual winding down of quantitative easing, a rise in the Bank of England base rate and a revitalised attitude to risk could all combine to boost pension prospects.

John Hawksworth, chief economist for PwC, said: “Recent developments in the US suggest this upward adjustment in yields may already be underway as the expected date for QE tapering has been brought forward in light of stronger expected growth.

“We are not at that point in the economic recovery yet in the UK, but we could get there at some time over the next year or two and, in any event, gilt yields are not immune to developments in US Treasury yields.”

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Paul Kitson, partner in the PwC pensions department, said the rise in gilt yields could provide relief for companies struggling to afford defined benefit schemes, but that it was difficult to predict what the long-term effect on all pensions would be.

“An increase in inflation expectations could negate or erode the effect of increasing gilt yields as UK schemes typically have a significant proportion of their liabilities linked to inflation.”


James Garman, chartered financial planner at Nottingham-based Retirement Specialist, said: “Over 10 or 20 years, nobody can truly predict what will happen to gilt yields, as has been proved in the past. However, we have had the Bank of England indicating that interest rates could rise again at some point. Until that time, gilt yields might be depressed but it is inevitable that they will rise at some point in the future.”