UK - Uncertainty surrounding a hung parliament will have a negative effect on scheme investments but could help reduce liabilities, independent consultant Ros Altmann said.
Altmann (pictured) said a hung parliament would force asset prices lower.
But she added that, despite falling asset prices, rising gilt yields were positive for schemes as they would help reduce liabilities, as bond yields are used to calculate scheme valuations.
However, she also said schemes would also be affected by changes in the equity markets.
She said the markets were in "never never" land before the election.
Altmann explained that, despite polls indicating a hung parliament, the market had priced-in a small Tory victory - a victory which clearly has not taken place.
She said: "The focus on sterling will be next. Gilt yields are far too low. We've got a massive budget deficit, but there is the potential the government, maybe even via Solvency II, will put pension funds and insurers in a position where they actually have to buy more gilts."
She added: "My prediction is sterling will fall and high quality corporate bonds will perhaps end up yielding less than gilts, because the credit rating of strong multi-national companies is probably better than that of a weak UK government."
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