Defined Benefit Section’s Funding Position Relating To Recent Extreme Market Movements

Last week saw significant investment market volatility, with unprecedented movements in the yields on gilts. As reported in the press, the market movements meant that some defined benefit pension schemes needed to liquidate assets rapidly in order to meet collateral calls for certain hedging contracts. Pension schemes may have also seen significant changes, perhaps positive in some cases, in their funding levels.

The investment strategy for the DB Section of the Prudential Staff Pension Scheme (the Scheme) has been designed to closely match future pension benefits, with a high proportion of the assets held in gilts. Interest rate and inflation risks are closely hedged and the approach taken limits the exposure to collateral calls.

The Trustee carefully monitors the Scheme’s funding and investment position. At this stage:

• the funding level remains stable, with a surplus against the key funding targets, and
• there are no concerns regarding the Scheme’s collateral position.

The Trustee does not expect any material change to this position in the near future as a result of the arrangements already put in place to manage the Scheme, but the Trustee will continue to monitor developments closely.