I’ve heard about the fall in the UK government bond market and wondered if my pension is safe?
Yes, your local government pension is safe.
You may have seen many articles in the media about the fall in UK government bond prices following the “mini-budget” announcement on Friday 23rd September and wondered just how secure your pension from the Avon Pension Fund is.
The Avon Pension Fund is part of the Local Government Pension Scheme (LGPS). The LGPS is a statutory defined benefit scheme which means that your pension will continue to be worked out using a set formula and it is guaranteed by Government. LGPS is funded by pension contributions from members and scheme employers.
The Avon Pension Fund reduces risk by spreading its investments across a wide number of different types of assets all over the world, including shares or equities, property, government bonds and company bonds. This means that if the value of one type of asset should fall (such as some bonds in the current market), then the other investments should protect the Fund. The Fund also has measures in place to source cash at short notice to support its investment strategy in the event of significant market volatility.
The Fund has experienced economic downturns in the past and a long-term view must be taken of investment returns.
Despite the uncertainty you may hear from the media concerning the UK government bond market, you should not be unduly concerned about your local government pension from Avon Pension Fund.
It is as secure a pension as it’s possible to have.
What about my AVCs?
Events such as the mini -budget or in the recent past, Russia’s invasion of Ukraine, can unsettle bond and equity markets and in the short term they can affect the value of money held in your AVC funds. Your AVCs sit outside the Avon Pension Fund itself and the extent to which they will be affected will depend on the range of assets held within the funds that you have chosen to invest in.
How long the value of your AVC will be affected for is uncertain. In the past markets have experienced sharp declines and recovered, however, the extent and speed of the recovery in current market conditions is difficult to gauge and dependent on a number of factors (such as the Bank of England’s recent intervention). The Fund is monitoring the situation closely and will update this statement as the situation evolves.
As our AVCs are part of our pension pot we can take a long-term view and the funds you are invested in are designed to weather the ups and downs of the markets over time.
The Summer issue of Avon Pension News is now available to download from the website. Copies are posted to members who pay into the Fund during August accompanying the Annual Pension Statement.
