Connected Research

Union policy research in the 21st century

Pension funds make money in 2009

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Bank New York Mellon Asset Servicing (why? just why?) has published a press release saying that UK pension funds earned an average 14% return in 2009 – the best return since 2005.

This represents a real return of some 14.9% given where the Retail Price Index has been during 2009.

I’d have a few quibbles with some of the methodology used in the release (the full year figure is a weighted average of an estimate of returns in the final three months of the year ‘linked to‘ the three previous quarterly weighted averages of returns), which has evidently been produced so that BNY can get in with its own figures early in 2010, not least for its own marketing purposes. So, a good deal of caution needs to be exercised around the figures. It’s not, for example, useable as a benchmark by which pension funds can measure the performance of their own investment managers during the year.

Nevertheless, the same figure for 2008 saw pension funds earn a return of -13.6% – so, essentially, on this basis, 2009 shows a remarkable turnaround, with the losses of 2008 now having been made up. A year’s growth has been lost (or, more accurately, two) but, otherwise, this would indicate that pension funds ought in general to be more or less back where they were, asset wise, at the end of 2007. This more healthy state for schemes, certainly compared to their position at the end of 2008, is thus a welcome sign that some of the pressures that schemes have been facing, which have led some scheme sponsors to make changes to occupational provision including scheme closures, may be coming to an end.

That is, of course, not the same as saying that such changes may themselves be coming to an end. But it does mean that closure decisions based on scheme funding positions at the end of 2008 do, as a result, look increasingly opportunistic.

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Written by Calvin

06/01/2010 at 5:09 pm

Posted in Pensions

Tagged with ,

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