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Pensions volatility 'to continue'
21 August 2007 15:31
The recent uncertainty seen in pension funds is set to continue, a new study suggests.
Although Mercer Human Resource Consulting notes that there have been some improvements in improving the risk profile of pension funds, it argues more work is still needed.
The report welcomes the growing use of risk assessment tools like 'value-at-risk', but calls for pension fund trustees to look in more detail at how their investments would react to a detrimental change in the markets.
The study comes after significant volatility in equity markets in recent weeks, with the UK's headline FTSE 100 remaining around ten per cent down compared to a month ago.
Problems in the US sub-prime mortgage market and uncertainty over the level of exposure of several large institutions sent worries across the world, resulting in many uk pensions – particularly those directly tracking the markets – losing substantial amounts.
A further reason for uncertainty for many pension funds is that longevity estimates are having to be revised further upwards, increasing a fund's commitments and often expanding its predicted deficit.
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