UK - The UK's top 100 company pension schemes have temporarily halted their flight from equities to bonds with allocations to fixed income remaining static over the past 12 months.

Figures from Pension Capital Strategies (PCS) found the FTSE 100 pension schemes were 49% invested in bonds; the same level as last year and ending the long-term trend of increasing fixed income holdings.

Charles Cowling, at PCS, said: "Pension schemes' flight out of equities into bonds seems to have halted. The average pension scheme asset allocation to bonds is now 49%, the same as last year. This compares to a very significant shift, from 41%, the previous year, and 35% just three years ago."

Hanging on to equity holdings appears to have benefited FTSE 100 schemes since PCS found that recent market rallies have pushed funding levels up by £17bn (€20.5bn) over the past year, with the total deficit now at £73bn.

However, where the UK's largest companies did make the switch to bonds, the allocations were significant as trustees attempted to de-risk their funds through asset liability matching.

Capital Shopping Centres went from a 42% fixed income allocation to an 87% over the year, while Barclays went from 47% to 63% and Serco increased its holding from 52% to 66%.

In spite of the recent fall off in equity/bond switching, PCS predicts that international financial reporting standards such as IAS 19 will force a pension funds to make greater allocations to bonds in the coming year.

Cowling said: "We can expect IFRIC14 to impact on pension scheme investment strategies. If shareholders see none of the upside of pension scheme investment in equities and all of the downside, there will inevitably be further pressure on company management to encourage moves towards lower risk investments in pension schemes."
 

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