State Street Global Advisors' chief investment officer is quoted in a newspaper interview as saying that UK pension funds hold too many equities instead of bonds - and that too many companies are reliant on high equity returns to pay for their pensions.

The Financial Times quoted State Street's Chris Woods as saying in an interview: "UK pension funds should have higher bond allocations - at the moment they have 70% to 75% in equities and that is too high."

The paper added that Woods believes firms are too dependant on high equity returns to fund their pensions. "If equities work out, everyone is happy. If not, then the company can close the pension scheme," Woods told the paper.

But not everyone agrees with the move from equities. “History shows that upturns in equities can be every bit as dramatic and unpredictable as downturns,” says the WM Company, a consulting firm owned by Deutsche Bank.

It added that it is possible that inflation will revive and bond prices will slide. “For long term investors such as pension funds a sound strategy is to buy and hold equities, as an asset class, rather than attempt market timing,” it said.

Woods' remarks follow press reports that Boots Plc’s pension fund, which switched out of equities and into bonds in November 2001, has gained £700m (e1.1bn) as a result of the move.