Help needed to improve UK pension annuity rates and quotes. The National Association of Pension Funds (NAPF) has called on the government to skew the issuing of gilts towards long-dated gilts and index-linked gilts. NAPF’s pre-budget report submission said such a move by the UK government would reduce pension fund deficits and cut the scale of overall pension fund liabilities on employer balance sheets. It said members of defined contribution pension schemes would also benefit, especially those nearing retirement because of higher UK annuity rates.
The NAPF said that, given low yields at the long-end of the gilt yield curve, skewing the issuance towards longer term maturities would also help give the government access to a cheaper source of finance, and potentially help accelerate the current economic recovery. It said that there was a “strong, and on-going demand” from pension schemes and insurance companies (annuity providers) for long-dated gilts and index-linked gilts so they can better match their liabilities. Recently, the NAPF’s annual survey revealed 82% of employer pension funds believed this action would be the most effective way government could help them continue to provide the better defined benefit pensions for their employees. However, despite the NAPF’s call for more gilt issuance and its belief that scheme demand is high, the Bank of England has said there wasn’t much scheme participation currently in index-linked gilt auctions. So, we might just have to suffer longer with lower pension annuity quotes and rates.
