Pension Funds Opting for Safety

Pension funds are playing it safe, according to new figures from the National Association of Pension Funds (Napf).

Over the last year, one in three funds has reduced the proportion of shares held in their portfolio with a quarter instead increasing their bond holdings.

Some 13 per cent of schemes chose to reduce their equity exposure by turning towards the property market whilst 11 per cent looked to hedge funds and commodities.

The average pension fund currently invests some 63 per cent of resources in shares with a further 29 per cent in bonds. Public sector schemes prefer to invest more in the stock market and less in bonds than their private sector counterparts.

Christine Farnish, Napf chief executive, said: "These findings add to the growing body of evidence that pension funds are becoming more risk-averse in their investment patterns.

"There are a variety of factors at work here, including greater longevity, lower interest rates, new accounting standards and a tighter regulatory climate.

"This combination of developments is leading UK pension funds to steer away from traditionally higher risk investments, like equities, and towards 'safer' options in order to match their liabilities more effectively," she added.