UK pension funds record best return since 2005

LONDON, 5 January 2010 — Estimates released by BNY Mellon Asset Servicing today show that the average UK pension fund achieved an estimated weighted average return of 14.0% for the year ending 31 December 2009 - this is the best return BNY Mellon has recorded since 2005. This is an estimated real return of 14.9% when measured against the Retail Price Index for 2009 and an estimated 12.8% when measured against the National Average Earnings Index.

This is a strong turnabout in annual performance of UK pension funds over the last 12 months. In 2008, the average UK pension fund achieved a weighted average return of -13.6% for the year ending 31 December 2008 - the first time that BNY Mellon has recorded negative yearly returns for UK pension funds since the three-year downturn at the beginning of the decade.

UK pension funds also made gains over a three-year period to 31 December 2009 with an estimated average return of 1.7% per annum. However, over this period pension funds failed to make gains against both the Retail Prices Index and the National Average Earnings Index.

According to BNY Mellon, results were mixed over longer term periods with funds achieving an estimated weighted average return of 6.4% per annum over a five-year period. Funds made real returns over this period of 3.6% per annum against the Retail Prices Index and 3.0% per annum against the National Average Earnings Index. Over 10 years to 31 December 2009 the average fund posted an estimated return of 3.2% per annum which beat the Retail Prices Index by 0.6% per annum, however, underperformed the National Average Earnings Index by 0.5% per annum.

Over the year returns were in positive territory for each of the key equity markets with one exception - Japanese Equities which posted the only negative equity return with -5.9%.

UK Equities posted 30.1% over the period while the strongest returns came from Pacific Ex Japan Equities with 50.7% and Emerging Market Equities with 58.9%.

Bonds were negative during 2009 with UK Bonds returning -1.2% and Overseas Bonds providing -9.7%. Index-Linked Gilts performed well in comparison returning 6.4% over the same period. Property continued to struggle with this sector returning -5.6%.

Commenting on the results, Alan Wilcock, BNY Mellon Asset Servicing' Performance and Risk Analytics Manager said: "Following the worst annual return for over 30 years in 2008, pension funds clawed back most of those losses by the end of 2009, despite the poor start to the year."

Total Fund weighted average return estimate for the year:

• This is calculated by linking the three quarterly weighted averages to 30 September 2009 with an estimated weighted average for Q4 2009.
• The Q4 2009 estimate is calculated by applying the weighted average asset distribution for funds at the start of Q4 2009 to the sector index returns for Q4 2009.
• The weighted average return represents the total performance of the pension fund assets within our sample.
• The weighted average is used in preference to the simple unweighted average, which takes no account of fund asset size.

BNY Mellon Asset Servicing offers clients worldwide a broad spectrum of specialized asset servicing capabilities, including custody and fund services, securities lending, performance and analytics, and execution services.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.1 trillion in assets under custody and administration and $966 billion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. Additional information is available at www.bnymellon.com.