The majority of pension professionals are now citing inflation as their biggest worry for the funds they manage according to new research.
This survey, of the UK Local Government Pension Scheme (LGPS) professionals found that 58 per cent said this remained the biggest concern going forward.
This was significantly higher than the next biggest potential challenge, longevity, cited by just 19 per cent of those surveyed.
A further 14 per cent cited affordability of future accrual as their fund’s biggest worry, and 9 per cent said geopolitics was the biggest threat.
The research is from Alpha Real Capital, the specialist manager of secure income real assets, found that that 53 per cent of respondents said the target for their investment portfolio post-valuation would be an inflation plus target (using CPI) while 47 per cent were using a gilts plus target as their benchmark.
This week ONS inflation figures show CPI was running at 9 per cent in April, with RPI at 11 per cent. Alpha says that, in light of higher inflation figures in recent months and the survey results, managing inflation risk will be top of mind for LGPS.
This is especially relevant this year as March 2022 is the date for triennial valuations and a trigger for reviewing investment strategy. Secure income real assets, with their contractual inflation-linked returns should feature as an asset class that will help LGPS meet their objectives.