Hugh Creasy, director of Xafinity Corporate Solutions, said that although equity markets had been strong in the past six months, this could not compensate for poor performance in the bond markets.
He said the main focus now for pension scheme finances had to be controlling investment risk.
Mr Creasy added: “Managing the financial risks of the changing outlook for interest rates and inflation is the greatest control sponsors can have over the size of the deficit on their balance sheet. The use of leveraged bond funds has allowed sponsors to achieve this control. Even inflation risk is now finally being recognised and addressed.”
While controlling these investment risks does not necessarily mean the end of the deficit, Mr Creasy said it could mean the end of increases in the deficit.
Adviser view
Nick McBreen, adviser for Truro-based Worldwide Financial Planning, said: “It’s not rocket science. The fundamental success of any pension savings strategy is its investment strategy. There is no magic solution.”
£bn | Jul 2013 | Jun 2013 | Jul 2012 |
Scheme Liabilities | 1,764 | 1,672 | 1,675 |
Scheme Assets | 1,135 | 1,093 | 1,097 |
Deficit | 629 | 579 | 587 |
Source: Xafinity Corporate Pensions Scheme model, based on all UK DB pensions and using FRS17 and IAS19 accounting rules
