UK Pension Plan Assets Get 23.9% Boost

(June 25, 2010) — According to an annual estimate by UBS Global Asset Management, assets in U.K. employer-sponsored pension funds rose 23.9% in the year ended December 31.

John Nestor, head of UK, UBS Global Asset Management, indicated that the focus for many pension schemes in 2010 is on diversification and reducing risk, while also aiming to achieve robust investment returns to close funding gaps.

“2008 and early 2009 was an extremely challenging and volatile period for financial markets and investors,” he said. “The large falls across most risk assets meant that pension funds saw their funding positions deteriorate rapidly during this time. Despite the recovery in financial markets during 2009, funding positions have not improved as much as might have been expected due to changes in the value of schemes’ liabilities.”

The asset management firm’s Pension Fund Indicators report revealed U.K. equities, which constitute 24% of pension assets on average, went from being the worst-performing asset class in 2008 to the best in 2009, rising 30.1%. Despite their volatility, over the past 47 years, UK equities have still returned 12.1%, the report said.

Additionally, the report showed the average UK pension fund’s allocation to equities reduced once again in 2009, with bonds benefiting. The total allocation to bonds is now at 36%, a level not seen since the late 1960s, reflecting investors’ continued risk-aversion after the events of 2008 and early 2009 and demand for liability matching assets, according to the release.

Average levels of real estate, overseas bonds and cash/other held at 7%, 5% and 3%, respectively, identical levels as in 2008.