The UK retirement industry is on course for meaningful changes in 2020. In this paper, MFS comments on the key themes that schemes, trustees and members may face in 2020 and give their thoughts on how trustees and their financial consultants might address the opportunities available. MFS hopes this helps you prepare for what will certainly be an eventful 2020.
MFS observes the following forces as continuing to shape the UK retirement industry in 2020:
- Low bond yields and a lower-returning investment environment
- The continued rise in assets and the shifting demographics of defined contribution schemes
- The increasing need for transparency and a depth of understanding when it comes to sustainable investing
- Planned changes in pension legislation envisioned under the proposed Pension Schemes Bill
Global growth slowdown and geopolitical uncertainty could dampen returns
Global equity markets shook off lacklustre 2018 returns and roared to record highs in 2019, buoyed by broad-based monetary accommodation by global central banks and renewed investor confidence. The return on a global equity portfolio for a UK investor in 2019 was around 23%1, with US equities up by over 28%2. The UK equity market, whilst exhibiting more volatility due to political events, finished 2019 with a 21% return for the year3.
Fixed income markets also saw gains throughout the year, driven by a significant decrease in interest rates around the globe. The net result was strong returns for most investors, with a hypothetical portfolio comprised of 60% global equity and 40% global fixed income returning just over 15% over the year.
1 Source: Estimated return based on the MSCI World Index (Net) in GBP.
2 Source: Estimated return based on the MSCI USA Index (Net) hedged to GBP.
3 Source: Estimated return based on the MSCI UK Index (Net) in GBP.
For institutional and investment professional use only. Issued by MFS International (U.K.) Limited ("MIL UK"), a private limited company registered in England and Wales with the company number 03062718, and authorised and regulated in the conduct of investment business by the UK Financial Conduct Authority. MIL UK, an indirect subsidiary of MFS®, has its registered office at One Carter Lane, London, EC4V 5ER and provides products and investment services to institutional investors globally.