According to the latest research, UK pension schemes hedged a record GBP13.9bn of inflation risk in the first quarter of 2012. It has been revealed that inflation hedging activity had almost doubled compared to the same period last year!
Finance iQ recently interviewed Gary Knapp, CFA, Trustee of the Pramerica Retirement Savings Plan, who spoke about Inflation Hedging for Absolute Beginners and offered a snapshot of why it is so high on the pension funds agenda nowadays. Mr Knapp also shared insights on where to go for in depth advice on inflation hedging and how to avoid unnecessary complexity dealing with inflation issues.
Commenting on the impact of inflation on pension schemes, Mr Knapp said: "Inflation in particular affects those schemes with indexed benefits. So, for example, rising inflation may raise future benefits and asset returns may not keep up - or even falling inflation may not cause benefits to fall, but this also usually means lower interest rates and that can increase liability values."
Gary Knapp will be presenting at the upcoming Pension Funds De-Risking Summit 2012, taking place in London on 5th and 6th of November.