Another mystery. This report from PwC says that the total pension deficit has reduced as a result of rise in yields.
They say that their source is data from the Pension Protection Fund. But see the chart above which I have overlaid with my estimate of the price of a 2030 gilt. You see that the 2030 gilt value precisely tracks the PPF liability estimates.
Here is the mystery: why so, given that LDI exists, and that LDI immunises schemes from changes in the long gilt rate?
Note also that the PPF say “”Conventional and index-linked gilt yields are used to value liabilities. *We do not hold sufficient data* to capture the impact of any structural changes to asset allocations nor to accurately capture changes in any leveraged LDI portfolios.”
So what is the true position?