Mellon Analytical Solutions estimates that the average UK pension fund returned 8.8% for the year ending 31 December 2006, the fourth consecutive calendar year of positive investment performance.
UK pension funds have also seen positive real rates of return over the longer term. Over the past 10 years the annual return was an estimated 7.6% compared with 2.7% for RPI. This was also ahead of annual earnings inflation which is estimated at 4.2%, based on figures to September 2006.
Daniel Hall, Mellon’s publications and statistics manager said: “Pension funds are now moving forward, following the damaging losses of the early years of this century. Based on weighted average performance, a fund with a value of £100m at the end of 1999 would have lost around £21m by the end of 2002. At the end of 2006, this fund would have been worth £129.9m, a 29.9% gain on the 1999 value.”
“There is no doubt that four consecutive years of positive investment returns is good news for pension funds. However the value of the assets is just one side of the story and we must remember that for many funds the pace of increase in liabilities is still a major concern,” Hall added.
All-day event on 24 April
Consequences could be more severe than in stress tests
AFH has six segregated mandate funds
Variable operating expenses