| Investment in pensions shifts from equities to 'safer bonds' |
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The Investment Management Association (IMA) has released the findings of a recent survey according to which as much as £40 billion of pension funds have been shifted from equities to Bonds providing fixed interest.
As per Richard Saunders, Chief Executive of IMA, the process is bound to “continue for some time yet, representing a fundamental reallocation of pension fund assets.” He also said that this shift was part of their estimate predicting a transfer of around £150 billion over a period of three to five years.
This shift comes in the background of 2004 being a good year for the UK stocks, with the FTSE index increasing by 7.5%.
The assets managed by IMA member firms in the UK and globally, however, registered a growth. The UK managed assets crossing the £2 trillion mark for the first time (£2.16 trillion) and globally managed assets closing at £7.87 trillion.
The shift from equities to Bonds is also a result of various final salary pension schemes closing down, which has arisen the need for those whose pensions are more likely to be effected by the upturns of the financial market to look to alternate and more secure means of investment. This, as per historic data, means more investments in Bonds rather than in equities and property.
Moreover, Independent Financial Advisers recommend Bond products to retail investors who want higher returns than keeping their money in bank or building society deposits, but at the same time are averse to taking the risks of investing in a highly volatile equity based funds.
With the widespread uneasiness of the pensions issue in the society, all eyes are set towards the government to see how it tackles the issue. Meanwhile, the prediction by IMA of such a shift seems to prove right, but the figure of £150 billion just might prove to be underestimated.
Posted
on : Fri, 27 May 2005 13:20 GMT | Pensions News
By : Paula Jenkins
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