Home Money Risk-averse UK pensions miss £400bn shares boost

Risk-averse UK pensions miss £400bn shares boost

by Elijah
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On the brink: Britain's defined benefit pension schemes have rejected equities in favor of supposedly safe bonds to meet their pension obligations.

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Risk-averse British pension funds have missed out on an estimated £400bn equity boom in just over a year as stock markets soar, research shows.

Last week, chipmaker Nvidia fueled another global stock rally as it beat its sales forecast, sending indices in the United States, Europe and Japan to record highs.

Nvidia’s stock market value jumped by more than £200 billion on Thursday alone, more than the £155 billion worth in total of AstraZeneca, Britain’s largest company.

The silicon chip maker has surpassed Google parent company Alphabet and Amazon to become the most valuable publicly traded company in the United States after Microsoft and Apple.

But Britain’s defined benefit pension schemes, which guarantee their 10 million members a retirement income, have failed to benefit after rejecting stocks in favor of supposedly safe bonds to meet their pension obligations.

On the brink: Britain's defined benefit pension schemes have rejected equities in favor of supposedly safe bonds to meet their pension obligations.

On the brink: Britain’s defined benefit pension schemes have rejected equities in favor of supposedly safe bonds to meet their pension obligations.

£300bn was lost last year as US shares rose by a quarter, according to accounting group PwC. The benchmark S&P 500 index has risen 7 percent since then, boosted by technology stocks.

“If UK pension schemes invested only for growth, the 2023 surplus would have been £300bn larger based on US returns,” said John Dunn, director of pensions at PwC.

Rules are being finalized to allow pension schemes to invest up to 30 per cent of assets in growth rather than income, which could boost returns for pensioners and the UK economy.

The 5,000 defined benefit schemes have total assets of £1.4 trillion, equivalent to half of Britain’s annual economic output.

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