“Pension fund crisis as gilt yields climb”

Sep 30, 2022 | Pensions

What? Why? With apologies to any investment professionals reading this (if you are, I’m flattered), here it is in a nutshell. To borrow money, the government issues bits of paper (gilts) which say ‘lend us £100, we’ll pay you 1% a year for 20 years and then pay you back’. Pension funds have to use these to secure your pension (Gordon Brown’s bright idea). If interest rates rise to, say, 4%, no-one is going to pay you £100 for your bit of paper which promises just 1%. That’s going to be worth maybe £25. The same is true of money lent to companies (corporate bonds), and as it’s expected that, to get the zillions needed to pay for those lovely tax cuts, interest rates will have to rise further. So your original paper might be worth only a tenner in the end. A perfect Crisis What Crisis, only saved, for now, by the Bank of England continuing the money-printing it’s been doing since the last (in that case global, not entirely self-inflicted) financial crash. Simples to explain, a tad more complicated to sort.

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“NatWest buys 85% stake in pensions fintech Cushon”

“NatWest buys 85% stake in pensions fintech Cushon”

OK, this might not sound like a big deal, but it is, I think, the thin end of yet another wedge. Not so many years ago, when the banking dinosaurs ruled the earth, they bought life insurance companies, fund managers and even estate agents…

“Annuity rates soar to 14-year high”

“Annuity rates soar to 14-year high”

I was asked this week whether annuities are now ‘a good investment’. They’ve been recommended very rarely in recent years, since ‘pension freedoms’ allowed pretty much unlimited drawdown on pension funds and anything left to be passed on to beneficiaries free of Inheritance Tax.