Marvin OnumonuTotal UK pension assets grew by 11% in 2024 to £3.2trn, according to a report from the Pensions Policy Institute (PPI), sponsored by Phoenix Group and Royal London.
Defined benefit (DB) schemes and annuities made up just under two-thirds of this total.
Private sector DB schemes moved further into bonds and away from equities and alternatives.
Public sector DB schemes also increased bond holdings, but still held more than 70% of assets in listed equities and alternatives.
The steady transfer of DB liabilities to pension annuities led to more assets moving towards corporate bonds and, to a lesser extent, property and infrastructure.
Workplace defined contribution (DC) assets were mainly in listed equities during the growth phase of default funds, with only a small proportion held in alternatives.
Overall, 44% of UK pension fund assets were in equities and alternatives.
£1.4trn was invested in UK assets, with UK Government bonds making up the largest share.
PPI estimated that 6% of the £3.2trn was invested in UK productive assets such as private equity, property and other alternatives, mainly led by DB schemes.
Including UK corporate bonds and listed equity brought the total to 20%, with annuity providers leading that shift.
The report pointed to six key themes in UK pension investment.
These included a move towards private markets for diversification, the importance of scale, social impact, securing the end game for closed DB schemes, uncertainty around Local Government Pension Scheme (LGPS) reforms, and geo-political uncertainty.
The data from 2024 did not show any major impact yet from Government reforms like the Mansion House Accord on allocations to private assets, but there were signs this could change as schemes expand and build capability.
Jamie Jenkins, director of policy at Royal London, said: “Pensions are now high on the political agenda, with politicians recognising the contribution they can make to the economy, alongside their central purpose of providing people with an income in retirement.
“The PPI’s study is fast becoming the definitive view of this investment landscape, illustrating the trends while highlighting the data gaps and pointing out the lack of clarity in how we define ‘productive finance.’
“This growing body of work should serve as a centre piece to the Government’s thinking on pension investments.”
