UK - Ed Balls, economics secretary to the treasury, has been accused of taking advantage of pension funds after he promised more long-dated gilts to the UK pensions industry.
In a speech at the National Association of Pension Funds (NAPF) investment conference in Edinburgh yesterday, Balls said the government had heavily skewed the gilt issuance towards long-dated and index-linked gilts and that absolute issuance of £17.3bn during 2006-07 was the highest since the Debt Management Office (DMO) was established in 1998.
He said the government was issuing the gilts in response to the needs of pension funds to invest in liability matching assets folllowing the implementation of new accounting standard FRS17.
The announcement was welcomed by some delegates at the NAPF conference, however, Con Keating, principal at the finance development centre, accused the government of taking advantage of pension funds. “This is just a case of borrowing cheaply while the going is good.”
He added: “Should pension funds be buying gilts at these rates? Almost certainly not!”
Balls said: “I can see that underlying conditions, notably the shape of the yield curve and strong demand for long dated index linked gilts, are very similar to a year ago and also seem likely to be sustained over the medium term."
He added: “Reflecting this, my conclusion is that our policy of skewing issuance towards long dated and index linked gilts is the right policy and will continue.”
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