Brexit vote increased Nationwide’s pension fund deficit

Nationwide’s pension fund deficit increased by £250m the day after the Brexit vote and a further £350m in the following three months, it has been revealed

Speaking at Pensions Age Autumn Conference, Nationwide pension fund chief investment officer, Mark Hedges explained that the risk associated with the UK voting to leave the European Union caused the deficit to rise.

“On the day after the vote our deficit increased by £250m, despite the fact that sterling went up and most of our assets went up in value, because we weren’t fully hedged on the private markets and the FTSE is mainly constituted of non-UK generating income streams. We saw a further £350m increase over the next three months as rates continued to tumble.”

Brexit risk was “a big part of TPR’s annual funding statement” and Hedges’ speech highlighted the effect it had on Nationwide’s pension fund, which has 30,000 members and £6bn in assets.

The volatile political landscape has left some in the industry uncertain of how to proceed to reduce their deficit. Hedges continued: “So what do we do? Do we hedge? Is it going to be a hard Brexit? Is it going to be a soft Brexit? What do I hedge? Sterling falls, asset values might rise. Rates, will they go up or down? It’s a difficult one to call.”

Technology is also causing risk as people are unsure whether the information they are receiving and reading is correct.

Nationwide is also having trouble in this area: “The one thing we found with what’s going on in the market is we don’t actually believe anything anymore. In the days of social media we get alternative facts.”

The uncertainty is causing risk to increase in the pensions industry, but Hedges doesn’t seem fazed: “Being a pension fund is relatively simple. It’s about making sure in the future I will have enough money to ensure I can meet the benefits that are due to my members. That’s my job, that’s my objective.”

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