UK - UK pension funds have seen returns of 3% on average over the past year despite equity market volatility leading to losses across almost all regions.

According to State Street Investment Analytics, the average exposure to equities fell by 6 percentage points as schemes de-risked and reinvested the majority of assets into fixed income, which rose to claim a 39% share of all assets, up from 34%.

Jeanette Patrizio, senior vice-president, said: “Equity markets continued to be very volatile, with daily moves of 1% or more almost the norm.

“The big selloff in the third quarter resulted in negative 12-month returns from most equity regions.”

North American equity returned 1% over the last 12 months, while Japan including the Pacific markets fell by 12%.

Europe fared worse, losing 14% of value, while emerging markets declined by 17%.

UK gilts, viewed as a safe haven, performed significantly better, returning 16%, while their index-linked counterparts generated 23% returns.

Patrizio said the rapid changes in bond yields seen over the last year had exacerbated the problems facing scheme trustees, as they resulted in “large swings” in individual funding levels.

Real estate - itself increasing to claim a 7% share of invested assets as equity markets dragged down the value of pension funds - returned 8% in 2011, the company said.

In other news, the Woolworths Group Pension Scheme - responsible for 10,000 former employees of the high street retailer that collapsed in November 2008 - has successfully transferred into the Pension Protection Fund.

Howard Jacobs, Chair of the Trustee at the £275m scheme, said an “inherently complex” wind-up had been complicated by inevitable problems, with Capita Hartshead citing the fact the scheme had several legally separate employers that all went insolvent at different times, as well as a change in the statutory retirement age during the transfer period.

“All of those involved over the last two, intensive years can be very pleased that the challenging timetable was met, by a combination of rigorous planning and good communication,” Jacobs added.

Topics