NEST to invest back in gilts, according to reports

Nest, which is the largest UK pension scheme with 12 million members, invests around £450m a month on their behalf but has avoided investing in UK government gilts.

At the weekend Edoardo Cetraro, investment manager at Nest told The Telegraph the position had changed. He said: “Nest doesn’t currently invest in gilts. In recent years, yields were very low and we didn’t see the reward for our members compared to other asset classes. Given the recent interest rate increases, we now believe gilts can play a strategic role in our portfolio and will be instructing our fund managers to consider potential deals.”

Nest said it would will be speaking with fund managers about the specific opportunities in the gilt market and will decide how much to invest. It added: "We believe we can find a role for them in our portfolio, particularly in the post-retirement phase. "

The yield on UK governments started to decline in the wake of the global banking crisis in 2008, and fell further after Brexit vote in 2016 and during the Covid-19 pandemic.

Since 2022 UK government gilt yields have risen, following the Russian invasion of Ukraine in February 2022, which brought about high global inflation and the ill-fated September 2022 "mini" Budget from former prime minister Liz Truss.

In October 2022, UK government gilt yields briefly reached highs of around five per cent — not seen since before the banking crisis in 2008.

UK gilt yields have partially fallen since the highs of October 2022 and have now appeared to stabilised around three per cent to four per cent, which is the level they were at 10 years ago.