Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
Quick links:
  • Home
  • The Actuary Issues
  • December 2011
12

DB bond allocations set to rise to 70% by 2017

Open-access content 29th December 2011

Pension scheme bond allocations will hit 70% within five years as investors seek a “safe path” away from equity volatility to more stable assets, JLT Pension Capital Strategies predicts...

2

The consultant said continued equity market volatility and increased regulatory pressures will cement the current flight from equities into bonds and lead to overweight fixed income holdings for a majority of the UK defined benefit sector.

JLT Pension Capital Strategies division managing director Charles Cowling said: "We would predict further flight from equities into bonds, with allocations hitting 70% within five years. The focus for pension schemes is to find a 'safe path' through the continuing volatility, which would suggest equity markets will most likely remain out of favour for the foreseeable future.

"De-risking will be the main objective for pension schemes over the coming years; with regulatory uncertainly presented by initiatives such as the proposed Financial Transaction Tax and market volatility still very much an issue, a 70% allocation to bonds does not seem an unreasonable prediction."

Figures from JLT PCS show the total deficit of FTSE 100 DB schemes was £47bn at the end of September 2011 - a £19bn improvement from a year earlier.

The end of Q3 also showed DB bond allocations at 50%, which represents a 15 percentage point increase from 35% at the same time in 2008.

However, the bond trend is not solely driven by markets - increased regulation is also a factor, JLT said.

"One of the recent changes to the methodology used to calculate PPF levies mean that schemes' levies will now reflect the riskiness of the assets they hold. This will give further incentives for schemes to shift their assets out of equities and into bonds," Cowling added.

"There is also the possibility that that the current EIOPA consultation1 could lead to solvency requirements being introduced for pension schemes, which would see this trend exacerbated, as it will encourage lower risk taking in pension schemes."

This article appeared in our December 2011 issue of The Actuary.
Click here to view this issue
Filed in:
12
Topics:
Investment
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Reinsurance Pricing Lead

England, London
£40000 - £75000 per annum
Reference
118905

Senior Pricing Actuary

London, England
£60000 - £110000 per annum
Reference
118904

Pricing Actuary (Casualty)

England, London
£60000 - £80000 per annum
Reference
118903
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2020 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200