Invasion of Ukraine shaves £25bn from UK pension assets

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” href=”https://www.law360.com/insurance-uk/articles/1471627/#”>Irene Madongo Law360, London (March 8, 2022, 3:55 p.m. GMT) – Global Securities Asset Price Drops Markets sparked by Russia’s invasion of Ukraine helped trigger a £25 billion ($33 billion) drop in assets held in British pension schemes, analysts said on Tuesday as they put warns of greater volatility ahead.

New data released by the Pension Protection Fund, Britain’s savings safety net, shows the total assets of the 5,215 defined benefit pension schemes it oversees stood at £1.732bn at the end of February , down 24.8 billion pounds from 1,757 billion pounds in January.

The data also showed that the overall plan surplus fell to £133.6bn at the end of February, from £146.4bn at the end of January.

Lisa McCrory, the fund’s chief financial officer, said: “While the overall funded position of the 5,215 defined benefit plans we protect remains broadly positive, a decline in global equity assets, offset by an increase in most returns bondholders, saw the overall surplus fall to £133.6 billion.

“It also means more schemes are in deficit with an increased overall deficit of £83.1 billion. Although the change at the aggregate level is small, the impacts on some individual schemes may be greater,” he said. she continued.

Vishal Makkar, head of pensions at Buck, an advisory firm, also noted the drop in the overall surplus and warned that “it could well be the calm before the storm, and there could soon be more volatility in road” as Russia’s invasion of Ukraine continues to affect global markets.

“Investment markets have already experienced severe turbulence and it is still difficult to predict what the likely long-term effects might be,” Makkar said.

Another consultancy, XPS, said its DB UK funding tracker, which monitors the funded status of defined-benefit pension schemes in the UK, shows that total scheme assets have fallen by 25 billion pounds in the month to the end of February.

XPS said the decline reflected “the significant impact on global markets of Russia’s invasion of Ukraine. significant fluctuations over the past month as the likelihood of conflict in Ukraine increased.”

XPS also observed that European stock markets took a brutal shock, with the FTSE 100 and Euro Stoxx indices both falling around 4% on the day of the invasion.

“The possibility of the situation deteriorating further is evident. However, markets are looking to the future and therefore current news and the potential for further deterioration can already be factored into prices,” he said. said Simeon Willis, chief investment officer at XPS. “Therefore, this may not represent a reasonable time for large-scale strategy changes.”

Russian forces entered the breakaway regions of eastern Ukraine in February, leading Western governments to start applying sanctions on financial enterprises and individuals in Russia. The West and global financial institutions have tightened sanctions since then, with many companies close their offices in Russia.

The sanctions have attracted the interest of financial services industry watchdogs.

Britain’s pensions regulator on Friday called on pension funds to review their investment exposures and to comply with British sanctions against Russia.

–Additional reporting by Najiyya Budaly and Martin Croucher. Editing by Joe Millis.

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