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UBS sees UK pension assets growing rapidly

UK – UBS Global Asset Management reckons UK pension assets will grow to 1.4 trillion pounds (1.98 trillion euros) by the end of 2012 – saying there a number of trends that point to “rapid future growth”.

“The combination of rising longevity and lower real bond yields means a larger fund of assets needs to be accumulated to finance a given retirement income than previously,” UBS said in a new report on the UK pensions industry.

It said the trend towards earlier retirement has “ended abruptly”. The focus now is “firmly on later retirement and the need for individuals to save more”.

It expects many more people to carry on working and accumulating assets for longer and delay taking a pension.

“The proportion of assets held in UK equities will continue to decline, bond holdings will continue to increase, and tactical asset allocation may re-emerge,” the 74-page report states.

It says that there is anecdotal evidence that scheme trustees are looking for managers to add value tactically between asset classes.

The report was upbeat on the future outlook, saying the pension’s industry’s current crisis may result in a “deeper understanding” of the market. “We may well look back on this time as the dawn of a new improved era in British pensions.”

And it said that scheme-specific benchmarks will rise in popularity. “Renewed focus on the fundamental asset allocation needs of pension funds will result in increased popularity of scheme-specific benchmarks involving traditional investment solutions.”

“Trustees will increasingly seek investments that directly address their liabilities,” it added.

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