As mentioned above, the Pension Fund Valuations & Market Values Working Party presented its report at Staple Inn on 25 October 1999. The Valuation Rates of Interest Working Party followed on from January 2003 until late 2004, when it was peremptorily closed down before a report could be prepared. I was privileged to be a member of both groups, the latter of which agreed that what was called the “multiple” approach had potential to provide useful guidance about long-term returns.

In short, using the data available, for equities and conventional gilts, we would estimate the potential long-term return as a multiple of the initial yield. This approach doesn’t work for index-linked gilts, for which a better approach is yield plus expected long-term inflation plus 1 % pa (RPI). The chart shows how the appropriate multiples have varied over time.