Major asset classes have performed reasonably well during Q1 of 2016. While equities had a shaky start to the year, they have bounced back to levels similar to those at the end of 2015. Corporate bonds and gilts have also experienced positive returns over the period. However, it is not all good news as it is likely that any investment gains will be more than offset by increases in schemes’ liabilities (as a result of lower bond yields), resulting in lower funding levels. To help draw attention to the practical implications, the effect of these market conditions have been illustrated on a typical pension scheme.
Finally, we also review recent developments in the arena of pensions accounting, highlighting issues that may be of interest.
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