You are here: Home - Retirement - Retirement planning - News -

Retirement incomes threatened by bond market turbulence

Written by:
Retirement incomes are increasingly at risk due to the global bond market sell-off, independent financial advisory firm, deVere Group has warned.

The caution comes after an estimated $450bn was wiped off global bond markets in recent weeks, with another significant bout of bond market turbulence experienced yesterday.

“It is still unclear whether we’re about to enter the end of the incredible three decade bond market rally – but what we do know is that the currently tumbling bond market is pushing company pension deficits even further into the red,” said Nigel Green, deVere Group’s founder and chief executive.

“As such, the bond market sell-off is threatening the retirement incomes and ambitions of a large number of workers. So-called ‘gold plated’ final salary schemes, which already have record deficits, are being hammered further because these pension funds are typically largely or wholly invested in bonds as they are perceived to be less risky than shares.

“Many people with a company pension wrongly assume their retirement incomes are safe.  Perhaps they were when they joined.  But this isn’t the case today due to the skyrocketing pension deficits which are now being exacerbated by a volatile bond market.”

He added: “I would urge people to have their company pensions checked sooner rather than later.  This is because it is likely that their values could fall further as most trustees have already made almost every change possible, such as raising retirement age and amending the amount of pension increases, yet the schemes remain extremely vulnerable.”

Chris Maule, chief executive of the UK Bond Network, also commented on the sell-off.

“The news that investors are rapidly selling government bonds highlights the risk of holding longer-dated fixed income investments. While bond yields have been low for a number of years, the lack of inflation has made them a relatively safe, if not hugely profitable, investment. However, there comes a point when the returns do not justify the risks and we may have now reached that point.

“It’s difficult to know at present if this market shift is a correction or if it’s the start of a new short or medium term trend. In either case, investors will want to know where they can place their money. Previously, we would have expected money to flow out of bonds and into equities but since the advent of quantitative easing, asset classes are moving broadly in line – consequently equity markets are also experiencing aftershocks. In such an environment, where should investors look for yield?

“One answer might be SME bonds. Medium-sized private non-financial corporations is now the segment most starved of access to credit across all UK business, according to the most recent Bank of England Trends in Lending report. By participating in this underserved segment, investors are able to access attractive and secured yields, while investing in what are arguably relatively creditworthy companies – and importantly in short-dated bonds which will be far more resilient to any forthcoming increase in inflation.”


There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

How to get 5% interest without tying up your savings for years

You don't have to put your money into a three-year fixed rate bond to get an inflation-beating return on your...
How to get 5% interest without tying up your savings for years

PayPal closing down Money Pools

The ability to create new Money Pools will be disabled from 30 September, while existing Money Pools will be s...
PayPal closing down Money Pools

Crackdown on buy now pay later lending

The Treasury has launched a consultation about regulation of the buy now pay later (BNPL) sector.
Crackdown on buy now pay later lending

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week