A study by Greenwich Associates shows that a full 80 percent of UK pension funds plan to significantly alter their asset mixes in the next three years, a finding that suggests recent strong investment performance has not been enough to eliminate the many critical problems facing the country’s plan sponsors.
Average funding ratios for UK corporate pension plans declined to 91 percent in 2006 from 92 percent in 2005, while local authorities saw funding ratios of their pension plans fall to 77 percent from 78 percent.
“These do not seem like significant decreases, but at a time in which investment performance has been robust, assets are growing and plan sponsors are making significant contributions, you would expect movement in the opposite direction,” says Chris McNickle, a consultant at Grenwich Associates.
These comments are based on the results of Greenwich Associates’ 2006 UK Investment Management Research Study, for which Greenwich interviewed 412 professionals at the largest UK pension funds between April and May, 2006. A new Greenwich Report presents the key findings of this research, which examines trends in funding ratios, asset allocations, new products, and the use of defined contribution structures. The report also analyses investments by UK pension funds in hedge funds and other alternative asset classes and presents the results of Greenwich Associates’ latest research into the compensation levels of UK investment professionals.