A 20 per cent increase in the global equity markets over the next two
years combined with a 1 per cent increase in corporate bond yields
would eliminate the pension deficit as an investment concern says
Standard Life Investments chief investment officer Keith Skeoch.
Skeoch says: “Clearly, rising equity markets are part of the solution.
However, a further rise in bond yields would be more beneficial.
Estimates from credit rating agencies such as Moody's or
stockbrokers such as UBS estimate that each 1 per cent rise in
yields reduces pension liabilities by 7 per cent to 16 per cent.
“Consequently, a 20% increase in the global equity markets over,
say, the next two years combined with a 1% increase in corporate
bond yields would, all other factors being equal, eliminate the
pension deficit to all intents and purposes as an investment