Pension funds focus on DC schemes and alternatives

Pensioner with caneDefined contribution (DC) now accounts for around 30% of the UK workplace pension scheme membership, with DC assets growing at a rate of 7% per annum over the last ten years.

In comparison, defined benefit (DB) assets have grown at a slower pace of 4.3%, according to research by UBS Global Asset Management.

The research indicates greater interest in DC pensions because pension providers have seen a spike in DC savers looking to better understand their options under pensions legislation.

As well as this, DB schemes may have to brace themselves for a potential increase in transfers out, according to Ian Barnes, UBS Global Asset Management’s head of UK & Ireland.

Elsewhere in the research, the firm finds that asset allocation of the average pension fund weightings to bonds increased slightly to stand at 38% in 2014 – a high figure relative to previous periods.

Denmark, Japan and the Netherlands in particular have high bond allocations, with Dutch pension funds on average allocating 55% to bonds compared to 30% to equities.

The report – called Pension Fund Indicators 2015 – also found that pension funds have recently been allocating a larger portion of their assets to new asset classes or capabilities that rely on gaining exposure to existing asset classes in different ways.

Real estate and infrastructure are becoming increasingly popular for pension funds.

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