UK - Moving from equities into bonds to satisfy FRS17 commitments offers a poor long-term matching of liabilities.
Invesco chief executive officer Sarah Bates said that as the accounting standard was introducing more volatility into balance sheets, trustees were coming under pressure to move their assets into bonds.
Bates said: “We should be matching pension scheme assets and liabilities on a long-term basis. I am yet to be convinced that equities are the wrong place to be.”
She added: “If you are trying to match a liability that is increasing, then investing in companies is where the returns will be.”
Bates pointed out that over the past 100 years the real return on equities had been 5.5% compared to only 1.3% for gilts.
Support for equities also came from Diageo group pensions and benefits director Steve Mingle.
He said equities enabled companies to take contribution holidays and provided them with an added reason to stay with defined benefit schemes. “The lowest long-term cost to a company is likely to be delivered by equity investment.”
This week's edition of Professional Pensions is out now.
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