The rapid rate of defined benefit (DB) scheme closure could see investment in UK equities fall by £24bn in the next two years, delegates at the National Association of Pension Funds (NAPF) Investment Conference heard.
NAPF investment council chairman Martin Mannion (pictured) said this figure could grow to £35bn by 2035 but added demand for index-linked gilts could top £85bn.
He claimed 10 years ago pension funds owned 20% of shares on the London market, while today they hold one quarter of the gilt market.
He said: “That turn around reflects where pensions are today. The pace of DB closure is having a dramatic impact on schemes’ asset allocation – you don’t need me to tell you that.
“Today just 13% of private sector DB schemes are open to new members. Last year saw the steepest fall in DB closure in over five years.
“Such trends will have a big impact on the amount of funds available for investment by pension funds in the real economy.”
However, while final salary schemes have continually reduced their equity holdings, Mannion said DC schemes would “take up some of the slack” in the coming years.
According to Department for Work and Pensions’ estimates, the amount saved in workplace pensions is set to grow by £11bn a year – much of that will be into DC pensions, with a resulting growth in the amount held in equities, he added.
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