Exposure to risky assets will be reduced in the coming years by 73 per cent of pension fund trustees, reports Pension Corporation.

The changes will be made through a variety of strategies, and to date more than two thirds (65 per cent) of trustees have taken action to reduce risk. Of this, 28 per cent have reduced exposure to equity markets, 25 per cent have employed a liability driven investment (LDI) strategy, and eight per cent have taken part in one or more pension insurance buy-ins or a buyout.

For future liabilities, LDI is being considered by 57 per cent, 35 per cent are looking at longevity insurance, and 45 per cent are considering a buy-in or buyout. The biggest barrier to reducing risk is cost (65 per cent), which Pension Corporation attributes 53 per cent of trustees wanting to prioritise funding any deficit to.

The study, The Future of Pension Schemes, ran from January to March 2010.

"This important study brought several key considerations to light, all of which will have a significant impact on the future of defined benefit pension funds in the UK," commented David Collinson, head of origination at Pension Corporation. "The study demonstrated that the fall of Lehman Brothers had a marked impact on the risk tolerance of pension fund trustees and we can see that the vast majority are now seeking to limit their exposure to risk."

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