Rising inflation could raise concerns for pension scheme investments and corporate sponsors, as well as potentially tempting more savers to transfer out their savings, Pictet Asset Management head of multi asset London, Andrew Cole has suggested.
Speaking at the Pensions Age Northern Conference 2022, Cole said that a period of high inflation where pension incomes are capped could see more savers tempted into alternative investments, particularly if their income isn’t keeping up with their cost of living.
“I think there is a bigger problem ahead,” he continued. “That backdrop for scammers offering higher rates of return because pensioners are suffering amid the cost of living crisis is actually going to worsen, and I think the regulator is going to have a problem there.”
Rising inflation could also impact corporate sponsors, according to Cole, who warned that “corporates are suffering”.
“There is a squeeze on their profitability because of inflation, and that will become clear in thinking about those covenants, whether they be private or public companies.” he said.
Cole also suggested that pension scheme trustees may need to be a bit more acute in where their asset allocation is at any moment in time, as inflation, on average, is going to be higher than the market has experienced the past 20 years.
“It’s a very different environment that we’ve experienced as investors over the past 12 months to what we’ve seen on average for the previous 25,” he explained….
