How Donald Trump’s Election Win Could Negatively Impact on Your UK Pension Value
Having unexpectedly succeeded in winning the 2016 US Federal election, Donald Trump’s policy intentions and the way these are carried out will be a key determinant on how markets perform over time. Even if the equity markets perform well, your UK pension value could be negatively impacted in the short to medium term (compared to values immediately pre-election), particularly where your UK pension is of a defined benefit nature.
Why? How are these related? The main reason concerns bond yields. Donald Trump’s strong view about investing into US infrastructure could be quite easily be seen as being inflationary, and lead to a rise in bond yields. As bond yields increase, bond prices decrease – they are inversely related. By the same token – final salary transfer values could also be impacted, negatively. This is because the discount rate attached to the future value of your pension payments increases, which hence reduces the present value of future pension payments you are due to receive. The increase in bond yields has been a noticeable trend since the election.
It is important to understand how and whether you could be impacted. For further information, please contact us on firstname.lastname@example.org or by phoning +44 345 450 4004.