Simplification is the key - Centre for Policy Studies

Table 1: Funded pension scheme assets, 2007, £ billion 32
Occupational pensions £1,505 77%
Insurance company administered £440
Self-administered £1,065
Personal pensions £450 23%
Insurance company administered £415
Self Invested Personal Pensions (SIPP) £35
Total invested in funded pensions £1,955 100%
The composition of these assets has changed over recent years as fund managers have
responded to short-term “noise” (global economic downturn, fund deficits and
accounting and regulatory pressures) by de-risking their portfolios. As Table 2 shows, the
direction of travel has been into bonds, from equities, as well as geographic
diversification into overseas investments. Alternative asset classes (such as art and
wine), remain almost invisible in pension funds, and property is almost entirely
commercial, not least because residential property cannot be held directly within a SIPP.
Table 2: UK pension funds’ asset allocation, £ billion 33
1996 2007
Equities 75% 56%
UK 53% 26%
International 22% 30%
Bonds 14% 30%
UK 11% 26%
International 3% 4%
Cash 6% 7%
Property (commercial) 5% 7%
100% 100%
The long-term consequences of this asset reallocation are, of course, unclear, but in the
short term the UK’s pension funds have done less badly than they would have done had
they maintained their historic (higher) allocation to UK equities.
1.8 Pensions wealth distribution
The distribution of pensions assets is hugely skewed in favour of the wealthy, as Figure 3
illustrates.
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PPI Pension Facts, Table 24, December 2008. The SIPP figure is from Money Management Survey, April
2007, and excluded some providers; therefore an under-estimate.
UBS, Pension Fund Indicators. Later date suggests that 49% of DB scheme assets are now held in
equities as funds switch into bonds (ACA Pensions Survey 2009, January 2010).
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