UK - New money available for investment by UK pension funds was less than money paid out in benefits for the second successive year, according to the WM Company, an Edinburgh-based performance evaluation company.

Figures from the WM Company show benefit outgoings exceeded the money coming into funds from the combination of employer and employee contributions and investment income. New money totalled minus £200m (minus €302.5m) against total assets of £356.3bn (€539.1bn).

This net outflow reflects the growing maturity of pension funds over the past 10 years. In 1994 new money totalled £3.9bn against total assets of £313.5bn.

Eric Lambert, head of client consultancy at The WM Company, said the reason for the shortfall was the maturity of the schemes. “Pension funds are getting smaller as benefit outgoings get bigger.”

UK pension funds continue to disinvest from UK equities, withdrawing £5bn in 2003. Yet as a result of strong equity performance weighting remained the same at 39%.

Pension funds took the opportunity of UK equity strength in 2003 to switch money into UK bonds. WM says this indicated that pension funds are aware of their overall strategic direction to increase UK bonds but that they have a market timing overlay.

In the first quarter of 2004, WM figures show that UK bonds continued to benefit from pension fund disinvestment in UK equity and net sales from overseas bonds and UK index-linked bonds.

However, the net effect of these changes on the equity: bond split in UK pension funds is small with about 65% still invested in equities.






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