Pension funds with their own scheme specific benchmarks have for the first time outnumbered those following the UK's CAPS benchmark.
These figures were released this week in the CAPS Pension Fund Analysis for the year up to 31 March 2001, covering 1692 pension funds - more than half of all UK segregated pension funds.
William Mercers’ head of investment strategy Andrew Green said that factors such as MFR, the Myners Review and FRS17 would mean that all the major consulting firms would support the trend to scheme specific benchmarks.
Schemes with their own specific benchmarks increased from 48% to 60% over the year - in turn 60% of such schemes outperformed their own benchmarks compared to the 50% of schemes who used CAPS as their benchmark.
Another key trend from the CAPS analysis showed that pension funds had lowered their allocation in UK equities from 54.5% to 53.5% and increased their bond allocation from 14.9% to 16.5%.
Prudential M&G head of institutional funds Pam Burgess said: “This will continue judging by the new business we have been seeing - schemes are allocating out of equities and into bonds and quite often into corporate bonds.”
The CAPS analysis also showed that less than 10% of pension funds produced a positive return for 2000/2001 with the median pension fund loss being -7.6%, the first such reported loss by CAPS in ten years.
Bacon & Woodrow associate in investment practice Michael Robarts said: “You have had one of the longest bull markets in history, there is bound to be a bit of setback.”
“What it is more much more interesting is what the average pension fund has achieved relative to inflation over that last ten years, I think you will find that the average pension fund has been well ahead of both RPI and earnings inflation.”
By David Rowley
A buyout tool which provides schemes with up-to-date pricing and comparisons between insurers has been launched by JLT Employee Benefits.
The DB white paper sets out plans to review the funding regime, with 'prudent' and 'appropriate' possibly redefined. But James Phillips asks if this could this signal a return to an MFR-like approach?
The trustees of GKN's pension schemes have agreed a package of mitigation measures that would improve funding to a "more prudent level" if Melrose's offer is accepted by shareholders next week.
While the new powers are welcome, most respondents doubt it will make a difference to the outcomes for members, Pensions Buzz respondents say.