The paper analyses the relationship between equities and gilt-edged. It shows that the yield ratio (the yield on gilts divided by that on equities) should no longer hold its almost mystical significance of the last decade, being but one component of the expected return on equities, in which the most significant element is the rate of dividend growth relative to the yield on gilt-edged. How equities perform in economic recession is highlighted. The paper reviews the performance of equities over the last 70 years in both nominal and real terms and analyses the historic sources of the equity risk premium, i.e. the excess return of equities over gilt-edged. If the equity risk premium remains at below-average levels in the 1990s, as is possible, constraints may be placed on actuaries' choice of pension fund valuation bases.