Brexit reveals the true risks faced by pension schemes

3 August 2016

Britain’s decision to leave the EU saw pension scheme funding levels take a lurch downwards in June as gilt yields fell to record lows, driving pension scheme liability values even higher. This was a turnaround from earlier in the year, when funding levels improved for the average pension scheme.

However clients are likely to have experienced widely differing fortunes. Those who had hedged their liabilities and held a well-diversified growth portfolio should have seen funding levels improve over this period. Those who didn’t are likely to have borne the full brunt of the Brexit break.

Our funding level tracker uses annual defi ned benefit asset and liability values
from the Pension Protection Fund’s Purple Book*. Between these updates, our Global Investment Solutions Team estimates how funding levels have changed each month. 

  • Changes in asset values are based on values for market indices that represent the average pension scheme asset allocation
  • Changes in liability values are based on yields on gilts that are similar to a typical scheme’s liabilities.