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AS TM1 Accumulation Rates – Technical Analysis as at 30 September 2024

The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.

The Financial Reporting Council Limited 2024

The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London EC2Y 5AS

Contents

• 1. Executive Summary
• 2. Context and scope
• 3. Data used
• 4. Volatility boundaries
• 5. Accumulation rates
• 6. Appendix

1. Executive Summary

1.1The Financial Reporting Council ('FRC') published AS TM1 v5.1 in February 2024 and it has been effective since 6 April 2024. The FRC carries out annual reviews to ensure the accumulation rate assumptions and volatility group boundaries remain appropriate.

1.2The previous review of these assumptions was conducted based on analysis of market conditions and fund returns up to 30 September 2023 as set out in a technical paper published in November 2023. At that time, the FRC noted the change in global market conditions and outlook and considered there to be sufficient evidence to support higher accumulation rate assumptions for volatility groups 1 to 3. Following consultation, AS TM1 v5.1 was published incorporating these changes.

1.3This paper sets out our review of the accumulation rate and volatility assumptions based on data up to 30 September 2024. Our analysis shows only limited changes in market volatility over the year. We have also seen limited change to indicators of future long-term expected return, either from our analysis of historical returns, or considering forward looking interest rates. We have also seen limited change in the long-term expected return assumptions in third party capital asset pricing models where these are available to us. The FRC therefore considers the current assumptions remain appropriate.

Volatility group boundaries

1.4There has been relatively little change in volatility for most funds over the course of the year to September 2024. The analysis of the distribution of the volatilities by fund types shows that volatility group boundaries in AS TM 1 v5.1 continue to be appropriate.

Accumulation rates

1.5Between 30 September 2023 and 30 September 2024 there has been relatively little change in long-term interest rates and gilt yields. There has also been relatively little movement in long-term returns as shown from our analysis of historical fund returns. The FRC considers the accumulation rate assumptions set out in paragraph C.2.4 of AS TM1 v5.1, which are summarised in the table below, to remain appropriate.

Group	Volatility	Accumulation rate assumptions in AS TM1 v5.1	Implied real return vs. AS TM1 inflation assumption (2.5%)
1	0% - 5%	2%	-0.5%
2	5% - 10%	4%	1.5%
3	10% - 15%	6%	3.5%
4	Above 15%	7%	4.5%

2. Context and scope

2.1Actuarial Standard Technical Memorandum 1: Statutory Money Purchase Illustrations ("AS TM1") specifies the assumptions and methods to be used for the calculation of statutory illustrations of money purchase pensions (also known as defined contribution ("DC") pensions) for annual Statutory Money Purchase Illustration (SMPI) statements, and Estimated Retirement Income (ERI) illustrated on pensions dashboards.

2.2The FRC reviews AS TM1 regularly and in the feedback statement for AS TM1 v5.0, we stated that we intend to review the boundaries between volatility groups, and the accumulation rate assumptions to be used for each volatility group, annually.

2.3This technical paper provides details of the analysis supporting our proposal (as set out in the consultation paper published at the same time) to make no change to the volatility group boundaries or to the accumulation rates. This paper should be read in conjunction with:

• a) the technical paper issued in October 2022 which supported the development of AS TM1 v5.0 and considered data up to 31 August 2021; and
• b) the technical paper issued in January 2023 which supported the FRC's decision not to update the assumptions in AS TM1 v5.0 at that time, and which considered data up to 30 September 2022; and
• c) the technical paper dated November 2023, which recommended an increase to the accumulation rate assumptions used for volatility groups 1, 2 and 3.

2.4This paper covers:

• Data used within our updated analysis up to 30 September 2024;
• Our analysis of the volatility group boundaries; and
• Our analysis of the accumulation rates by volatility groups.

3. Data used

3.1The primary data set used in the analysis was obtained from Morningstar Direct. The data were checked, cleaned, and reconciled against the previous year's data set. This included 1,082 time series of monthly returns for UK wholesale pooled pension funds covering the period from 1 January 1985 to 30 September 2024. We conducted further checks and excluded some of the data from our analysis. For example:

• Some time series had missing returns for some months. For funds that remain extant, we understand that this results from the fund manager not reporting the fund's return in that month. The return reported in the following month does not include the return for the missing month. Therefore, any calculation of a volatility or a return which included a month with missing data was treated as null and excluded from the analysis. Funds with missing data were still included, but only for periods for which they had enough valid data to calculate the volatilities and returns required for the analysis.
• There were some funds which reported 0% returns in a given month. This differs from missing returns in that it indicates that a return of 0% was actually reported. We understand in some cases these could be genuine 0% returns, whereas in others these were a result of reporting stale prices. Within our analysis for any individual time series, we excluded periods where more than 5% of returns were reported as zero. For money market funds, we extend this to allow up to 25% of reported returns being zero, as genuine zero returns were expected to be more common for these funds.
• There were 7 funds that included one or more monthly returns that are significant outliers compared to the returns for all similar funds for those months. These funds have been included in the analysis but with those particular monthly returns amended to 0%.

3.2The analysis described in this paper (as well as our previous technical papers) was based on UK wholesale pooled pension funds, which we consider adequately covers the types of funds typically used by UK money purchase pension schemes.

3.3We are aware that there may be some survivorship bias in the returns data as some poorer performing funds may have been merged into better performing funds. We consider the adjustment made for prudence in the accumulation rates is sufficient to allow for this.

4. Volatility boundaries

Purpose

4.1The purpose of this analysis was to establish an appropriate set of volatility groups with which a set of accumulation rate assumptions can be associated. As set out in section 5.1 of the Technical Analysis published in October 2022 we aim to establish a set of volatility groups which meet the following principles:

1. Funds in the same group should be sufficiently homogenous that it is reasonable to project them with the same accumulation rate
2. Funds in different groups should generally be discernibly heterogeneous such that it is reasonable to project them with different accumulation rates
3. The group ranges should strike a balance between being sufficiently broad that funds will change between them infrequently, but retain a reasonably small step change in accumulation rate assumption between different groups
4. The groups should be appropriate under the prevailing market conditions at the point at which providers are required to calculate their 5-year volatilities
5. We should avoid spurious accuracy in drawing the boundaries between groups.

4.2We have also considered the impact of funds moving between volatility groups under alternative proposals.

Change in volatilities

4.3In previous analyses, we sub-divided the data into broad asset groupings (on an approximate basis from fund names and various classifications in the Morningstar data) and considered the historical rolling volatility of each asset grouping, to determine whether there is a clear separation in the volatilities between broad asset groupings.

4.4The analysis has been updated to include data up to 30 September 2024 and the graph below shows the 5-year median volatility from 2007 to September 2024 (the dashed line is 30 September 2023, the effective date of our previous annual review):

4.5To show recent movements in volatilities more clearly, the following graph zooms in on the period since 31 August 2021:

4.6Since the previous annual review at 30 September 2023 (dashed line), most equity funds have seen a decrease in volatility of between 0% and 1% and most fixed income funds have seen an increase in volatility of between 0% and 1%. Mean changes in fund volatilities by fund types are broadly in line with the increases in relevant indices:

Fund type	Mean change in volatility of funds in data¹	Index	Change in volatility of the index
Equity	-0.62%	FTSE All World	-0.47%
Corporate bonds	0.32%	S&P U.K. Investment Grade Corporate Bond Index	0.24%
Fixed interest gilts	-0.02%	FTSE Actuaries UK Conventional Gilts All Stock	0.15%
Index linked gilts	-0.24%	FTSE Actuaries Govt Securities UK Linked Market Value All Stocks	-0.19%

Range of volatilities

4.7The graph below shows the 95th to 5th percentile of 5-year volatilities for each key asset grouping. We observe that since the previous analysis, there is a greater overlap between the distribution of volatilities of the equity funds and fixed income funds.

4.8We also considered how the distribution of volatilities of each type of fund varies by fund size and this is shown in the chart below.

We observe:

• Equity volatility is generally in the range 12%-17% and maintaining a boundary of around 15% would continue to divide equity funds into two groups with a reasonable proportion of equity funds above the 15% boundary, but with the majority of equity funds below the 15% boundary.
• The majority of multi asset funds lies in the range of 6%-14%.
• Money market funds consistently sit at a very low volatility (0 to 1%).
• Fixed income funds still span a significant range of volatilities, although a large proportion of fixed income funds now have a volatility of 15%-17%.

4.9The broad grouping of fixed income funds consists of funds which are invested in conventional gilts (fixed), index-linked gilts, corporate bonds, and other types of bonds. These are distributed as follows:

4.10The majority of the fixed income funds with a 5-year volatility above 10% are index-linked gilts (ILGs) (although we also observe a significant number of corporate bond funds in this group – see paragraph 4.12 below). We expect ILGs in general to have higher volatilities relative to their expected return than other funds. This results from long-dated ILGs potentially having a volatile market price (as their long duration makes them sensitive to long term real interest rate movements) but, as for conventional gilts, not being expected to earn a significant risk premium. This disconnection between volatility and expected returns for ILGs has arguably increased due to market movements since September 2022, with the majority of ILG funds now having a volatility above 15% placing them in volatility group 4 (under the existing volatility group boundaries).

4.11The higher volatility of ILGs was considered and commented on in the consultation on AS TM1 published February 2022, and we considered it was acceptable due to the relatively low prevalence of ILGs investment in money purchase funds, particularly for savers further from retirement where the accumulation rate has the most significant impact on the pension illustrations. The FRC has commissioned research into the default asset mix for DC members at different stages of their pre-retirement journey, the result of which will also aid our understanding the impact of this issue on SMPIs.

4.12Corporate bonds span a wide range of volatilities. This is to be expected as this is a relatively broad asset class and could include a range of types of corporate bonds, including different levels of credit risk. Corporate bond funds can differ significantly in both volatility and expected returns and therefore can reasonably be expected to span multiple volatility groups.

4.13An increase to the 15% volatility group boundary between 3 and 4 could be made to bring the majority of index linked and corporate bond funds into group 3, but that would result in many higher risk equity funds also moving down to group 3. Given the analysis, we do not consider there is sufficient need to alter the volatility group boundaries and the existing volatility group boundaries continue to remain appropriate.

Alternative volatility boundaries considered

4.14Given there have been some changes in market volatility, maintaining the existing rates would result in some funds moving to a different volatility group. We therefore conducted further analysis to understand these movements and how this may differ under alternative volatility group boundaries.

4.15We considered the proportion of funds (weighted by fund value) within our data set that would be categorised into a different volatility group if we maintained the current boundaries between volatility groups, without applying the 0.5% corridor as specified in C.2.12 of AS TM1. The table below shows the categorisation of funds given current boundaries based on volatilities as at previous and this September. In particular, 5% of funds by value had volatilities over 15% (Group 4) at 30 September 2023 and below 15% as at 30 September 2024 (Group 3).

| | Volatility at 30 September 2024 | | :------------------------------ | :---------- | :---------- | :---------- | :---------- | | Proportion of funds by value | Group 1 | Group 2 | Group 3 | Group 4 | | | 0-5% | 5-10% | 10-15% | >15% | | Volatility at 30 Sep 2023 | | | | | | 0-5% | 4% | 0% | 0% | 0% | | 5-10% | 0% | 19% | 0% | 0% | | 10-15% | 0% | 1% | 51% | 0% | | >15% | 0% | 0% | 5% | 19% |

4.16Decreasing the volatility boundary from 15% to 14% would however result in a higher overall proportion of funds (by value) being re-categorised. Although more funds which had a volatility above 15% last September would remain in Group 4 if the boundary were lowered, 12% of funds had a volatility below 15% last September but above 14% this September and therefore would be re-categorised to Group 4 – whereas they would remain in Group 3 if the boundary were unchanged.

| | Volatility at 30 September 2024 | | :------------------------------ | :---------- | :---------- | :---------- | :---------- | | Proportion of funds by value | Group 1 | Group 2 | Group 3 | Group 4 | | | 0-5% | 5-10% | 10-14% | >14% | | Volatility at 30 Sep 2023 | | | | | | 0-5% | 4% | 0% | 0% | 0% | | 5-10% | 0% | 19% | 0% | 0% | | 10-15% | 0% | 1% | 39% | 12% | | >15% | 0% | 0% | 1% | 23% |

4.17The above does not allow for the effect of the corridor, as specified in C.2.12 of AS TM1. When determining the volatility group for an investment, C.2.12 of AS TM1 allows a 0.5% corridor before an investment changes volatility group from the previous year's volatility group. Therefore, the movement between groups would be smaller than what is suggested in the above tables.

4.18In addition, it is useful to bear in mind that although the data set (which is based on UK wholesale pooled pension funds) adequately covers the types of funds typically used by UK money purchase pension schemes, the data set is not expected to capture all money purchase investments in the UK. Therefore, the analysis can only be an illustration to informing us of the likely impact on the movement of actual funds held, rather than a comprehensive investigation of the distribution of actual funds.

Conclusion

4.19The analysis above suggests keeping the boundaries unchanged will result in least movement in funds between volatility groups, noting that any smaller movements to the boundaries than tested above will be spurious to the level of precision of our approach. We are also mindful that the AS TM1 pension projection basis is for the purpose of a general pension illustration, rather than an accurate individualised pension projection. For these reasons, we do not consider there is sufficient need to alter the volatility group boundaries and the existing volatility group boundaries continue to remain appropriate.

5. Accumulation rates

5.1The determination of the appropriate accumulation rate assumption for each volatility group is a subjective process and requires an element of judgement to be applied to the results of any statistical analysis. We have based our updated analysis on the approach in the technical paper published in October 2022, which sets out how we used a combination of backward-looking data-driven analysis and judgement-based forward-looking analysis.

5.2AS TM1's methods and assumptions are used for the purpose of general pension illustration, rather than an accurate individualised pension projection. The FRC considers it important that the resulting accumulation rate assumptions can be determined consistently for different funds, and the resulting statutory illustration should be easy to describe to savers and to be understood by them. Our intention continues to be generally to avoid significant changes in accumulation rate assumptions from one period to the next, to the extent that the accumulation rates remain appropriate.

Analysis of past experience

5.3The derivation of the assumptions in the technical paper of October 2021, based on data up to 31 August 2021, is quoted in the table below. The derivation is set out in more detail within the October 2022 technical paper. This analysis is based on considering past returns but with specific adjustments made e.g. where our view was that past returns may not be repeated in the future. For reference we also show the updated results published in November 2023, used in our most recent previous review, which resulted in the same rates when rounded.

Group	Previous analysis at 31/08/2021	Previous analysis at 30/09/2023	Adjust for bond effect	Adjust for prudence	Accumulation rate assumptions (rounded)
1	1.9%	1.7%		-1.0%	1%
2	6.8%	6.2%	-2.0%	-1.5%	3%
3	7.1%	7.2%	-0.5%	-1.5%	5%
4	8.9%	8.4%		-1.5%	7%

5.4The analysis includes an adjustment for the 'bond effect', which intends to mitigate the excess returns seen for gilt funds in volatility groups 2 and 3 that resulted from the decline in long-dated bond yields over the period up to 2020. This was based on our view there was a natural floor to bond yields, and that therefore the past experience of significant reductions in long-dated bond yields up to 2020 would not continue in future.

5.5The updated dataset now contains a significant number of 15-year return periods that include years from 2022 where there has been a significant increase in long-dated yields (see the chart in paragraph 5.11), so unwinding some of this bond effect. We have therefore reduced the adjustment for the bond effect for volatility group 2 from 2% to 1.5%. Given the approximate nature of the bond adjustment we consider it not necessary to reduce the 0.5% bond adjustment for group 3.

5.6Allowing for this change in bond adjustment, the updated analysis at 31 September 2024 is set out below.

Group	Latest data analysis at 31/09/2024	Adjust for bond effect	Adjust for prudence	Accumulation rate assumptions (unrounded)	Accumulation rate assumptions (rounded)
1	1.4%		-1.0%	0.4%	0%
2	5.6%	-1.5%	-1.5%	2.6%	3%
3	7.4%	-0.5%	-1.5%	5.4%	5%
4	9.0%		-1.5%	7.5%	8%

5.7We note that the accumulation rates in the updated analysis have changed in a number of cases since the previous year's analysis. In general these are relatively minor changes, exaggerated by the effect of rounding. We consider these below.

5.8The additional data included this year² for volatility group 1 (which are mostly Money Market funds) reflect the low interest rates environment that was in effect for most of the period from 2008/2009 to 2023/2024. This has reduced the average returns seen for volatility group 1, to 0% after allowing for prudence adjustment and rounding. As set out in our technical paper issued in November 2023 (and repeated in the appendix of this paper), the accumulation rate under this method is inconsistent with more forward-looking return indicators, such as bond yields.

5.9For volatility group 3 and 4 there has been a slight increase in the accumulation rate indicated by this analysis. The outcome for group 3 still rounds to 5% and for group 4, the outcome is now 8% after rounding, although we note that the unrounded long-term rates are little different from those seen in our analysis of 2021.

Analysis of forward-looking interest rates

5.10Long dated real gilt yields (as an indicator of the risk-free returns that can be achieved in excess of inflation) increased significantly between 31 August 2021 and 30 September 2023. This movement was considered in the rationale for increasing accumulation rate assumptions for funds in volatility groups 1, 2 and 3, made within AS TM1 v5.1.

5.11As shown in the chart below, real gilt yields³ have remained broadly stable over the course of the last year, arguing against any further adjustments to accumulation rates at this review.

Analysis based on fund type

5.12We considered the accumulation rate assumptions that would be derived by incorporating a forward-looking view of the returns for each of the fund types sitting within each volatility group. This provides an additional perspective from which to consider potential future returns, compared to the output of the analysis described in paragraphs 5.3-5.9.

5.13For this particular analysis, the approach (as followed in last year's review) for considering the forward-looking return for each fund type is as follows:

• For money market and fixed income funds, the returns are based on the average of 15- and 20-year government bond yields.
• For corporate bond funds, the returns are based on the yield on the S&P U.K. Investment Grade Corporate Bond Index, with a broad adjustment for default risk (taken to be half of the spread between this corporate bond yield and the fixed interest government bond yield).
• For equity funds, given there is no specific indicator of future returns, the historical returns⁴ within our data set for that equity fund type (broken down by broad geographic regions) were used.
• The returns for property and unclassified funds were also based on the historical return as observed in the data.
• A 50/50 mix of corporate bonds and equities was assumed for multi-asset funds and the corresponding returns for each fund type as above were used. Although we have limited detail on the make-up of multi asset funds in our dataset, we understand these funds to be predominantly a mixture of equities and bonds, and the historical returns on multi-asset funds in our dataset have been roughly halfway between the returns on corporate bond funds and the returns on equity funds.

5.14The resulting accumulation rate assumptions by volatility group are shown in the table below, alongside the figures from last year's review for comparison:

| | 2024 Review | 2023 Review | | :---- | :---------- | :-------------------------------------- | :---------- | :-------------------------------------- | | Group | Implied rate | Accumulation rate assumption (after rounding) | Implied rate | Accumulation rate assumption (after rounding) | | 1 | 4.0% | 4% | 4.1% | 4% | | 2 | 5.6% | 6% | 5.5% | 5% | | 3 | 7.0% | 7% | 6.5% | 6% | | 4 | 5.9% | 6% | 6.1% | 6% |

5.15There are limitations in using this analysis by fund type and so we do not consider it is appropriate to use these results alone in setting accumulation rates. This analysis can, however, alongside our analysis based on past returns, help inform an overall judgement of the appropriate accumulation rates to use. In particular, this analysis would potentially give accumulation rates that vary frequently, due to the sensitivity to changes in bond yields. There is also arguably an inconsistency in the approach which combines forward looking indicators for some fund types (e.g. gilts), and past returns for others (e.g. equities).

5.16This analysis also shows a lower accumulation rate for group 4 than for group 3. This results primarily from:

1. Group 4 containing a significant proportion of index linked gilts which have a lower assumed expected return (under this methodology) than the historical returns of the other funds in the group which are mainly equity funds. If these gilt funds were in volatility group 3 then the derived accumulation rates would be very similar for group 3 and 4.
2. This approach making no distinction between different equity fund strategies within a geographical grouping, e.g. all 'UK equity' funds are treated as having the same return, rather than differentiating between higher risk (volatility) and lower risk funds. Were this complexity taken into account, the derived accumulation rate for group 4 would be higher.

Benchmarking against third party assumptions

5.17We have also considered the long-term return assumptions in third party capital asset pricing models ('CAPM's) for the various asset classes where these have been made available to us. This analysis has considered models used by 15 different organisations.

5.18We have seen little change in the expected returns (net of assumed CPI) in these CAPMs since last year, across a range of different fund types.

Conclusion

5.19None of the results from the above analyses show a significant movement in expectations of long-term future investment returns, and so do not lead to a compelling case to make changes to accumulation rate assumptions. We consider the rationale for the accumulation rate assumptions set out in the technical analysis published in November 2023 remains appropriate. For reference, we have set out this rationale in the appendix to this paper.

6. Appendix

6.1We have set out below the rationale provided in the technical analysis published in November 2023 for setting the accumulation rates in AS TM1 v5.1. We consider that for each of the four volatility groups, the rationale in last year's technical analysis remains valid.

Volatility group 1: accumulation rate at 2%, 0.5% below inflation assumption

6.2Volatility group 1 comprises principally of Money Market funds, as well as a small number of shorter-dated bond funds.

6.3We consider it reasonable for the accumulation rate assumption for group 1 to be below the real gilt yield, both to reflect the short-term nature of cash investments and to make some allowance for prudence in the assumption.

6.4The accumulation rate assumption of 2% for group 1 means a real accumulation rate assumption (net of inflation, assumed to be 2.5% under AS TM v5.0) of -0.5%. We consider an accumulation rate slightly below assumed inflation is appropriate to avoid giving unrealistic expectations of long-term growth in cash holdings, particularly given there have been significant periods of time (such as 2008 to 2022, and in the 1970s) where cash did not keep up with inflation.

6.5An accumulation rate assumption for group 1 of 3% or higher may give an unrealistic projection of potential cash returns over a long period of time.

Volatility group 2: accumulation rate at 4%, 1.5% above inflation assumption

6.6Volatility group 2 comprises mainly corporate bond funds and lower volatility multi-asset funds.

6.7The types of funds comprising group 2 would be expected to yield a premium above the 'risk free rate' over the long term and therefore we consider it appropriate for the real accumulation rate assumption for this group to be higher than the c1% real risk-free rate (so above 3.5% nominal), although the level of this premium requires a certain amount of judgment.

6.8One indicator for funds in this group may be to consider the 'risk premium' on high quality corporate bonds, which is expected to be in the region of 0.7%-1.2% before adjusting for default risk⁵. A higher risk premium might be expected for some multi-asset funds, which seek exposure to potentially higher returning assets such as equities. We are conscious, however, that it is appropriate to maintain a margin for prudence in the accumulation rate assumptions used. An accumulation rate of 4% gives a real (above assumed CPI inflation) accumulation rate of 1.5%, which we consider to be a reasonable and prudent premium of 0.5% above the current 'risk free' rate implied by gilt yields of c1%.

Volatility group 3: accumulation rate at 6%, 3.5% above inflation assumption

6.9Volatility group 3 comprises mainly lower volatility growth asset⁶ funds and higher volatility multi asset funds.

6.10Our analysis of past data continues to show a positive correlation between the volatility of funds and their subsequent long-term return, and so we consider it reasonable for the accumulation rate assumption for volatility group 3 to be greater than that for group 2 but below that for group 4.

6.11The accumulation rate of 6% for volatility group 3 keeps the margin between group 2 and group 3 at 2%, which we consider sufficient to capture the additional potential for return from investing in more volatile funds.

Volatility group 4: accumulation rate of 7%, 4.5% above inflation assumption

6.12Group 4 consists primarily of higher volatility growth asset funds, although currently, owing to volatility in the gilt market, it is also expected to contain some index linked gilt funds.

6.13The accumulation rate of 7% is consistent with the experience over the long term of returns on higher volatility investments, after a suitable adjustment for prudence.

6.14We also compared the proposed rate of 7% for group 4 to the equity return assumptions used in third parties' capital asset pricing models, where we see a range of c.6% to 11%. This provides external support that an accumulation rate of 7% is towards the prudent end of the scale for higher volatility growth asset funds such as higher risk equity funds.

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1. The figures in this column show the mean increase in volatility of funds in our dataset that have volatility values for both 30 September 2024 and 30 September 2023. This differs from the approach in previous years where increase shown in our analysis was affected by funds joining and leaving the population. ↩

2. One year of additional data up to 30 September 2024 includes 15-year return periods starting between October 2008 and September 2009 and ending between October 2023 and September 2024, with associated volatilities measured over 5-year periods ending between October 2008 to September 2009. ↩

3. Yields taken from the Bank of England's real gilt yield curve, shown as annually compounded rates. ↩

4. The returns used are the annualised geometric average return for the fund since 1 January 1985, or inception if later. As the number of funds in our data set increases over time, only a small proportion of returns cover the full period back to 1985. ↩

5. https://ifamagazine.com/2023-outlook-for-uk-equities-and-fixed-income/ considering 5-year average spreads on AAA to A rated bonds. ↩

6. Here we consider 'growth assets' to include the likes of equities, convertible bonds and some corporate bonds. ↩

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