Real rates of return

<p>It is widely recognised that the real rates of return which have been earned on most financial assets in the UK in recent years have been negative-the yield on investments has not been high enough to compensate for the erosion of capital values through inflation. There are many purposes for which it is necessary to use estimates of future real rates of return, particularly those concerned with the funding of prospective pensions. Yet despite this adverse recent experience, there is a general reluctance to contemplate the possibility of negative real returns in furture, and to consider the provisions which would be needed if the future were in this respect like the past.</p>