Pressures to shift holdings away from UK equities to primarily corporate bonds will continue to drive strategic holding decisions amongst pension fund trustees and life assurance companies, according to Legal&General research.
The Minimum Funding Requirement, FRS 17 accounting rules, and changing views on mortality rates are just three factors persuading pension funds they must switch to bonds to better match assets with liabilities. The bear market exacerbated by events of 11 September, 2001, coupled with an increasing drive to close existing schemes to new members – primarily DB schemes – have coupled lower equity returns with schemes that are maturing faster than they otherwise would do if new members were still coming in, warns Andrew Clare, L&G financial economist. ”This is a risk-reduction exercise,” ...
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