*Guest content from B&CE
Since the start of auto-enrolment in 2012, more than 10 million people have brought into pension savings. Over this period, the most remarkable growth has been seen by those making regular contributions to their pensions in defined contribution schemes.
The People’s Pension Default Fund
The People’s Pension Default Fund was launched in January 2013 and has delivered an average annual return of 7.74% after fees, even with this year’s steep falls in financial markets. These returns are above average, realised over the longer term and have been driven by loose monetary policies from the major central banks up until late last year. With zero interest rates and the printing of money, bond prices have been boosted, encouraging investors to allocate towards higher risk assets, particularly equities.
The war in Ukraine has released the inflation genie from the bottle and central banks have begun increasing interest rates at a rapid pace. With a background of high inflation, rising interest rates and weaker growth are reflected in falling bond prices and lower equity valuations, and we’re expecting annual returns for the next decade to be roughly 2% below what has been achieved so far.
At the same time, we’re also seeing a rise in geopolitical risks, reflecting the rise of nationalism and a retreat from globalisation. Climate change also presents an unprecedented risk as well as opportunities for pensions.
How The People’s Pension is addressing market challenges
To address the issues mentioned above, we’ll need to explore more opportunities to add value to pensions for members of The People’s Pension. What this means in practice is:
- taking a more dynamic approach to asset allocation and investing in alternative sources of return such as private markets, infrastructure and potentially even direct investments into building projects that align with our social purpose
- navigating our members’ investment through the transition to a low carbon economy by reducing the risk of holding stranded assets
- exploring opportunities in green and renewable energy, and
- increasing engagement with our investee companies, ensuring that they’re managing the evolving risks around environmental, social and governance factors.
To address the changing world order, we’re also building on our in-house investment capability to ensure we have access to additional sources of return for pensions, all while being able to mitigate risks wherever possible. The result is that members of The People’s Pension should feel confident that we’ll have enough tools in our investment toolbox to meet challenges the markets may present over the next decade.
For more information on The People’s Pension, visit thepeoplespension.co.uk.
Join us at the FMB Building Conference on 8 November
B&CE, provider of The People’s Pension, will be discussing the management of pensions and how to invest for success in a changing world order at the FMB’s Building Conference on 8 November.
The conference, which is free for FMB members and sponsored by B&CE, will bring together policy makers, industry stakeholders and Master Builder companies in a live and virtual audience, to debate skills, retrofit, and standards in construction. The event will conclude a drinks reception sponsored by Jewson and Build Aviator which will include a speech by guest speaker Lee Rowley MP, Housing Minster.
Find out more and how to book on the FMB Building Conference event pages.
*Disclaimer: This blog post is guest content, which is independent of the FMB. Publication does not constitute endorsement or recommendation from the FMB.
