Increased bond levels may not meet pension demand

In a research paper entitled: The Bond Market Yield Crunch, the consulting firm estimates at the end of 2005 UK defined benefit pension scheme assets totalled approximately £750bn, of which £62bn, or 8%, was invested in sterling inflation-linked bonds. With the closing of many pension schemes and increased longevity expectations, Watson Wyatt, says schemes have started to mature rapidly. This changing demographic profile, along with a regulatory driven desire to reduce investment risk, means many pension schemes are targeting higher bond weightings. According to the firm, the UK inflati...