By Chris Dorrell
Pension funds saw their valuations plunge by nearly a quarter in 2022, partly due to the bond market turmoil that followed Liz Truss’s mini budget, new research suggests.
According to a new report from the Pensions Regulator, the value of assets held by pension funds fell by around £425bn over 2022, equivalent to a 24 per cent fall in the overall value of scheme assets.
“This fall in assets is primarily due to the loss in value of gilts, corporate bonds and property,” the report said.
Asset values hit their lowest point in September, pointing to the impact of Truss’s fiscal event.
Pension funds were hit hard after the government announced tens of millions in unfunded tax cuts, which spooked the bond market.
Bond prices dropped, forcing defined-benefit pension funds to try and shore up their funding positions by selling more gilts. This turned into a fire sale that only abated after the Bank of England stepped in to stabilise the market.
Despite the sharp fall, pension funds actually saw an improvement in their overall funding level of around 15 per cent in the course of the year.
“The primary reason for the improvement in funding levels is due to the fall in the value of liabilities exceeding that of the value of assets,” the Pensions Regulator noted.
