Statistical bulletin: MQ5: Investment by Insurance Companies, Pension Funds and Trusts, Q3 2012

Key points

• Total net investment is estimated to have been £20 billion in the third quarter of 2012, approximately £11 billion higher than the estimate for the second quarter of 2012.
• The level of net investment by unit trusts and property unit trusts for Q3 2012, at £16 billion, is the highest recorded estimate since quarterly records began in 1987.
• This release reports on these institutions’ balance sheets at the end of 2011. Total assets were valued at £3,010 billion compared with £2,895 billion at the end of 2010.

Overview

This release contains quarterly net investment data arising from financial transactions (investments) made by insurance companies, self-administered pension funds, investment trusts, unit trusts and property unit trusts. Also included are quarterly balance sheet data for short-term assets and liabilities, along with quarterly income and expenditure data for insurance companies and self-administered pension funds. All data are reported on a current price basis.

In addition, every third quarter release contains annual balance sheet data for all the institutional groups; providing information on the market value of assets and liabilities. Annual income and expenditure data for insurance companies are also reported at this time.

Published alongside this release is an information note: Revisions to MQ5: Investment by Insurance Companies, Pension Funds and Trusts, December 2012 (367 Kb Pdf) . This note outlines two methodological changes which have caused revisions to be made to series contained within this release. Users, in particular regular users, of these data are advised to read this information note prior to reading the release.

We are aware that a number of users make use of these data for modelling or forecasting purposes. In doing so, careful attention should be paid to the revisions policy (50.7 Kb Pdf) for this release.

A glossary (211.8 Kb Pdf) is available to assist users with their understanding of the terms used in this release.

User engagement

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: Financial.Inquiries@ons.gsi.gov.uk or telephone David Matthews on +44 (0)1633 456756.

Net investment by asset type

The total assets of the businesses covered by this release were valued at around £3,010 billion at the end of 2011, the latest period for which annual results are available. During 2011, these businesses acquired and disposed of approximately £1,500 billion of assets. Net investment is the difference between these substantial levels of acquisitions and disposals and can therefore be volatile. Table 1 displays net investment data by asset type.

Net investment is estimated to have been £20 billion at Q3 2012 (Figure 1). Total net investment varies across the quarters of a calendar year and so an increase or decrease in investment from one quarter to the next is not necessarily an indicator of improved or worsening economic activity - these estimates are more likely to reflect varying investment strategies. In terms of context, the three year quarterly average for this series is investment of approximately £14 billion. The highest ever quarterly estimate of net investment was £43 billion at Q3 2007.

The total estimate for Q3 2012 (£20 billion) is in line with the level of net investment recorded for the third quarter of a year over the previous five years (an average of £23 billion), despite the estimate for Q3 2011 only being £3 billion.

Figure 1: Total net investment

Source: Office for National Statistics

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Short-term assets

Investment in short-term assets (those maturing within one year of their originating date) returned to a period of investment at Q3 2012, from a period of disinvestment last quarter. Short-term assets investment can be affected by the level of net inflows of funds into the businesses concerned (premiums or contributions for example) and by the relative attractiveness of other investments, both in the returns they may potentially generate and in their perceived risk. At Q3 2012 the businesses covered by this release invested an estimated £3 billion in short-term assets (Figure 2). This is down from a recent peak in Q1 2012 of £14 billion.

Since Q3 2010 there have only been two quarters of net disinvestment (Q3 2011 and Q2 2012). This contrasts with the period Q3 2008 to Q3 2010, inclusive, when six of the nine quarters showed net disinvestment in short-term assets. This longer-term comparison highlights how institutions, taking account of the prevailing economic climate, have chosen to restructure their investment portfolios. The six year quarterly average for this series is investment of £2 billion.

Figure 2: Net investment in short-term assets

Source: Office for National Statistics

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British government sterling securities (gilts)

Gilts are fixed income or index-linked bonds issued by the UK Government. The purchaser of a gilt is lending the government money in return for regular interest payments and the promise that the nominal value of the gilt will be repaid (redeemed) on a specified later date.

Since the end of 2008, the yield on gilts has tended to fall and, although this investment is effectively risk-free, the returns on it may cause fund managers to switch into or out of gilts. The fund managers of institutions covered by this release once again disinvested in gilts at Q3 2012 by around £3 billion (Figure 3), continuing a trend of disinvestment in gilts for 2012 as a whole. This trend of disinvestment in 2012 is a change from 2011 when net investment was relatively flat and in stark contrast to 2010 when gilts attracted net investment of £29 billion, a record in current price terms for this series which goes back to 1984.

This trend can best be explained by reviewing the role gilts play in financial markets. Gilts are useful investments to buy when interest rates are high and are likely to fall. If interest rates fall, the price of the stock rises and the gilts may be sold at a profit. Conversely, if interest rates are low, as they are at present and have been for the best part of four years, the price of gilts is high and a loss might be anticipated if the stock is held to redemption. For example, if investment managers were to buy a 10-year gilt today, the return on their investment would probably be less than inflation, so effectively their investment would be decreasing in value every day.

Figure 3: Net investment in British government sterling securities (gilts)

Source: Office for National Statistics

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UK corporate securities and overseas securities

The last survey of these businesses’ balance sheets, for the end of 2010, showed that for the first time the value of overseas ordinary shares held by these institutions exceeded the value of UK ordinary shares. This trend continued in 2011 and may be continuing into 2012 (though we would need the revaluation data that are implicit in the balance sheet survey to be sure). This change in strategy, over the past three years, marks a key shift and would seem to indicate that the institutions covered by this release have more confidence in their ability to make money from overseas securities than they do from securities within the UK.

In 2011, as a whole, and for all surveyed periods of 2012, there was disinvestment in UK corporate securities and investment in overseas securities (Figures 4 and 5). The quarterly estimates for 2012 would seem to suggest that institutions are now investing more heavily in overseas securities, to the value of £41 billion so far (compared with only £13 billion for 2011 as a whole), than they have done previously.

Figure 4: Net investment in UK corporate securities

Source: Office for National Statistics

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Figure 5: Net investment in overseas securities

Source: Office for National Statistics

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Other assets

Investment in other assets, which includes mutual fund investment, has been positive since Q3 2003. In the third quarter of 2012, there was net investment of £5 billion (Figure 6). This level of investment is in line with the previous six quarters, but is lower than the recent high estimates returned for Q3 and Q4 2010 (£14 billion and £12 billion respectively).

Figure 6: Net investment in other assets

Source: Office for National Statistics

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Table 1: Net investment by asset type

Table source: Office for National Statistics

Table notes:

1. Components may not sum to totals due to rounding.
2. Data for all quarters of 2012 remain provisional and subject to revision until the incorporation of the 2012 annual survey results in December 2013.

Net investment by institutional group

Net investment data for each of the institutional groups covered by this release are displayed in Table 2.

Long-term insurance companies

These are companies which undertake life assurance, pensions and critical illness business. Such companies provide either protection in the form of life assurance or critical illness policies or investment, in the form of pension provision.

Long-term insurance companies showed net disinvestment of £4 billion (Figure 7) at the third quarter of 2012.

Of more significance, disinvestment is now confirmed to have occurred in two of the four quarters of 2011 and for 2011 as a whole, the first year this has occurred in this series which dates back to 1963.

Figure 7: Net investment by long-term insurance companies

Source: Office for National Statistics

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General insurance companies

These are companies which undertake other types of insurance such as motor, home, travel etc. This type of insurance is usually over a shorter period.

General insurance companies are estimated to have shown a small level of investment at Q3 2012, of £2 billion (Figure 8). This level of investment is similar to the average level of investment recorded by general insurance companies, on a quarterly basis, over the past five years. The largest single quarterly estimate in this series over the past five years was at Q1 2010 when general insurance companies disinvested to the value of £6 billion.

Figure 8: Net investment by general insurance companies

Source: Office for National Statistics

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Self-administered pension funds

These are funds established by employers to facilitate and organise the investment of employees' retirement funds.

Self-administered pension funds returned to investment at Q3 2012 (£11 billion) after a quarter of slight disinvestment at Q2 2012 (Figure 9). The current level of investment by self-administered pension funds for 2012 (£23 billion) is higher than for both 2010 and 2011 as a whole. If self-administered pension funds continue to invest at Q4 2012, the total level of investment for the year will return to a similar level last seen in 2009.

Figure 9: Net investment by self-administered pension funds

Source: Office for National Statistics

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Investment trusts

Investment trusts acquire financial assets with money subscribed by shareholders or borrowed in the form of loan capital. Investment trusts are not trusts in the legal sense, but are limited companies with two special characteristics: their assets consist of securities (mainly ordinary shares) and they are debarred by their articles of association from distributing capital gains as dividends. Shares of investment trusts are traded on the Stock Exchange and increasingly can be bought direct from the company.

The trend in the figures for investment trusts at Q3 2012 continued broadly flat as it has been since the beginning of 2008 (Table 2).

Unit trusts and property unit trusts

Unit trusts include open-ended investment companies but they do not cover other unitised collective investment schemes or those based offshore. Unit trusts are set up under trust deeds, the trustee usually being a bank or insurance company. The funds in the trusts are managed not by the trustees, but by independent management companies. Units representing a share in the trusts’ assets can be bought from the managers or resold to them at any time.

Property unit trusts are not allowed to promote themselves to the general public and participation is generally restricted to pension funds and charities. Property unit trusts invest predominantly in freehold or leasehold commercial property yet may hold a small proportion of their investments in the securities of property companies.

Unit trusts and property unit trusts continued to invest in the third quarter of 2012, their 19th successive quarter of investment (Figure 10). The level of investment by unit and property unit trusts for Q3 2012, at £16 billion, is the highest recorded estimate since quarterly records began in 1987.

In each of the last three years, and already for 2012, net investment by these institutions has been over £30 billion a year, the largest by far of any institutional group.

Figure 10: Net investment by unit trusts and property unit trusts

Source: Office for National Statistics

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Table 2: Net investment by institutional group

Table source: Office for National Statistics

Table notes:

1. Components may not sum to totals due to rounding.
2. Data for all quarters of 2012 remain provisional and subject to revision until the incorporation of the 2012 annual survey results in December 2013.
3. The consolidation adjustment is an adjustment to remove inter-sectoral flows between the different types of institution covered by this statistical bulletin. The adjustment includes (i) investment in authorised unit trust units, open-ended investment companies and investment trust securities by insurance companies, pension funds and trusts and (ii) investment by pension funds in insurance managed funds and property unit trusts.

Income and expenditure by institutional group

Rather than provide commentary on total income and expenditure for the institutional groups, it was considered more beneficial to users, based on their feedback, if commentary concentrated on the main components. For insurance companies, premiums and claims are the focus, while contributions (net) and payments are the focus for self-administered pension funds (Table 3). It should be noted that no income and expenditure data are currently collected for the trusts institutional group.

Long-term insurance companies

Long-term insurance premiums, at £27 billion in the third quarter of 2012 (Figure 11), were at a very similar level to all quarters of the past three years, but were slightly below the five year quarterly average of £29 billion.

Back in 2006 and 2007 the value of premiums exceeded the value of claims. This trend has been reversed since and has continued into 2012. In each of the years 2008 to 2010, the value of claims was around 23% greater than the value of premiums. In 2011, claims amounted to £140 billion against premiums of £106 billion (a 31% difference). At Q3 2012, claims (£36 billion) were 34% greater than the value of premiums (£27 billion).

Figure 11: Long-term insurance companies' premiums and claims

Source: Office for National Statistics

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General insurance companies

For general insurance, premiums (£9 billion) were 57% greater than the value of claims (£6 billion) at Q3 2012 (Figure 12). These series have remained relatively unchanged for the past six years.

Figure 12: General insurance companies' premiums and claims

Source: Office for National Statistics

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Self-administered pension funds

Contributions (net) to self-administered pension funds for the third quarter of 2012 (£10 billion) were on a par with contributions for the third quarters of 2011 and 2010 (£9 billion and £10 billion respectively).

The highest level of contributions to self-administered pension funds since these data were first collected in 1992 still stands for Q1 2012. The revised estimate for Q1 2012 of £17 billion is a record and is further evidence that there would seem to be a pattern of behaviour for funds to make one-off payments to reduce the deficits in their funds at Q1 and Q4 of a given year, leading to a tendency for the figures for the first and fourth quarters to be higher than those for the other quarters of the year (Figure 13). It will be interesting to see if this pattern continues for 2012, after such a strong Q1 estimate.

Figure 13: Self-administered pension funds' contributions (net) and payments

Source: Office for National Statistics

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Table 3: Income and expenditure by institutional group

Table source: Office for National Statistics

Table notes:

1. Components may not sum to totals due to rounding.
2. Data for all quarters of 2012 remain provisional and subject to revision until the incorporation of the 2012 annual survey results in December 2013.

Holdings at market values by asset type

At the end of 2011, institutions’ total assets were valued at £3,010 billion compared with £2,895 billion at the end of 2010 (Table 4). This rise of 4% reflects both the revaluation of assets held through the year and the balance between the sales of some assets and the purchase of others (net investment or transactions).

The value of assets rose for three of the five asset types in 2011 compared with 2010 (Figure 14). Short-term assets increased by 31%, the value of British government sterling securities (gilts) rose by 20% and other assets by 7%. UK corporate securities and overseas securities decreased in value (7% and 4% respectively) in 2011 compared with 2010.

Analysing patterns of investment and the final value of different asset types during 2011 highlights some of the defining features of financial markets during this period. Despite a slight disinvestment in gilts, the value of holdings increased by just over 20% during 2011. This reflects the impact of several factors, including the Bank of England’s programme of Quantitative Easing (QE) and the indirect effects of the Euro-zone sovereign debt crisis. The QE programme – held constant for much of 2011 – grew by £50 billion during Q4 2011. The higher demand for gilts appears to have reduced their yield, with a corresponding positive effect on the price and value of gilt holdings.

In contrast, the institutions covered by this release invested £13 billion in overseas securities in 2011, but the value of their holdings decreased by 4%. This may reflect the decrease in overseas share prices through 2011 as global economies struggled to recover from the financial crisis that affected worldwide markets.

Figure 14: Holdings at market values by asset type

Source: Office for National Statistics

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Table 4: Holdings at market values by asset type

Table source: Office for National Statistics

For only the second time since the series began, in 1964, the value of overseas ordinary shares held by these institutions in 2011 exceeded the value of UK ordinary shares (Table 5). As recently as 2001, the value of UK ordinary shares held was more than double the holding of overseas ordinary shares, but since then the value of holdings of UK ordinary shares has reduced by a third in cash terms while holdings of overseas ordinary shares have grown sharply in value (by approximately 60%).

Table 5: Holdings of UK and overseas securities at market values

Table source: Office for National Statistics

Table notes:

1. Includes bonds and preference shares.

In 2011, mutual funds and other assets comprised 79% of the other assets total, which is in line with the 2010 estimate (Table 6). In percentage terms, the largest increase between 2010 and 2011 was for UK loans and mortgages, which increased by 36%. In 2011, UK loans and mortgages made up 5% of the other assets total.

Table 6: Holdings of other assets at market values

Table source: Office for National Statistics

Table notes:

1. Includes British government securities denominated in foreign currency, UK local authority & public corporation securities, overseas loans and mortgages, UK & overseas mutual fund investments, other UK fixed assets, overseas fixed assets, direct investment and other assets not elsewhere classified.

Revisions arising from the results of the 2011 annual surveys

The annual surveys provide a fuller view of financial activity by these institutions than can be obtained from the quarterly surveys, which sometimes have to be estimated by the businesses that respond. As a consequence there are revisions to the published data for the year, including net investment. In the years 2001 to 2007 (that is, before the financial crisis) those net investment revisions, irrespective of sign, averaged approximately £8 billion. In the years 2008 to 2011 (when markets have been more fluid), the annual revisions have averaged almost £20 billion.

For 2011, the total net investment by these institutions is estimated to be £24 billion. This estimate is approximately £31 billion less than before the data from the annual surveys were available. This revision is due to the result of new information being available from a considerable number of businesses, many of which (particularly in the pensions sector) now take the view that their net investment during the year was at a lower level than their first estimate. It is important to note that many businesses forecast their first estimates. This further helps to explain the sizeable discrepancy between the two estimates, especially if financial markets, which have been hard to predict over the past few years, do not perform in line with these businesses expectations.

The largest single revision, by asset type, was for overseas securities, which has been revised downwards by £14 billion (52%) as a consequence of this process.

Both acquisitions and realisations are now seen as having been at lower levels than first estimated. The revision for acquisitions by all businesses in the institutional groups covered by this release was around 3% and realisations are now seen as being approximately 2% lower than before. The difference between the two is now approximately £26 billion less than previously estimated.

In addition to the above annual revisions an information note (367 Kb Pdf) , published alongside this release, outlines two methodological changes that have caused revisions to some published series. Revisions have been taken back to the year 2000. Users, in particular regular users, of these data are advised to read this information note.

Background notes

1. Institutional groups

   Insurance companies

   Active in both life insurance and non-life (general) insurance, they also conduct pension business on behalf of companies and individuals. Long-term business (mainly life insurance and pensions) has an emphasis on the spreading of risks over time, whereas general business is mainly concerned with the spreading of risks between persons and organisations.

   Besides consisting largely of life insurance, long-term business also includes occupational and individual pension business. Pension business includes both insured funds and insurance managed funds. Insured funds belong to pension schemes where the schemes’ trustees hold, as a sole asset, an insurance policy contract or an annuity contract. All the schemes’ assets are held in one insurance company and have a guaranteed level of return.

   The figures for long-term funds include items relating to shareholders' funds in respect of pure life companies. For other companies these items are consolidated into the figures for general funds.

   Self-administered pension funds

   The data in this release relate to the self-administered pension and superannuation funds of the private sector and to the funded, self-administered schemes of local authorities and employees previously employed in the nationalised industries.

   Insurance managed funds are included in the self-administered pension funds statistics .The main superannuation arrangements in central government are unfunded and these are excluded from the statistics. Fully insured funds are also excluded but their activity is included in figures for insurance companies' long-term business.

   A self-administered pension scheme is defined as an occupational pension scheme with units invested in one or more managed schemes or unit trusts. The trustees of these types of schemes can employ either an in-house fund manager to make the day-to-day investment decisions or they can opt to use an external manager to manage the investment.

   Investment trusts

   The figures cover investment trusts recognised as such by HM Revenue & Customs for tax purposes and some unrecognised trusts. Investment trusts companies acquire financial assets with money subscribed by shareholders or borrowed in the form of loan capital. They are not trusts in the legal sense, but are limited companies with two special characteristics: their assets consist of securities (mainly ordinary shares) and they are debarred by their articles of association from distributing capital gains as dividends. Shares of investment trusts are traded on the Stock Exchange and increasingly can be bought direct from the company.

   Unit trusts

   The data covers unit trusts authorised by the Financial Services Authority under the terms of the Financial Services Act 1986. The statistics include open ended investment companies but they do not cover other unitised collective investment schemes (for example unauthorised funds run on unit trust lines by, for example, securities firms and merchant banks, designed primarily for the use of institutional investors) or those based offshore (Channel Islands, Bermuda etc.) or in other EU member states. Unit trusts are set up under trust deeds, the trustee usually being a bank or insurance company. The funds in the trusts are managed not by the trustees, but by independent management companies. Units representing a share in the trusts’ assets can be bought from the managers or resold to them at any time.

   Property unit trusts

   The statistics aim to cover all UK property unit trusts authorised under the terms of the Financial Services Act 1986. The trusts are not allowed to promote themselves to the general public and participation is generally restricted to pension funds and charities. Property unit trusts invest predominantly in freehold or leasehold commercial property yet may hold a small proportion of their investments in the securities of property companies. Their assets are held in the name of a trustee and are managed on a co-operative basis by a separate committee (elected by the unit holders) or company.

2. Basic quality information

   A Quality and Methodology Information (QMI) report (270.2 Kb Pdf) can be found on the Office for National Statistics (ONS) website. The aims of the QMI report are to provide users with a greater understanding of ONS’s statistics, their quality and the methods that are used to create them.

3. Uses of data

   The primary use of data from the insurance companies, pension funds and trusts surveys is in the Financial and Sector Accounts and the compilation of Gross Domestic Product (GDP) estimates within the UK National Accounts and the UK Balance of Payments. There are numerous other users within and outside government who use the data to produce various financial analyses and to inform policy decisions. Such users include:

   Bank of England: Data are used for monetary policy and financial stability purposes.

   Department for Work & Pensions: Specifically interested in the investment activity of pension funds, and any pension business undertaken by insurance companies.

   HM Revenue and Customs: Data are used to aid taxation analysis of financial institutions.

   Association of British Insurers: Compare its own data with that of ONS, to ensure both datasets display similar trends.

   Department for Business, Innovation and Skills: Use data to analyse investment activity across various financial instruments.

   Debt Management Office: Data are used to monitor the investment activity in British government securities (gilts).

   Investment Management Association: Compare its own data with that of ONS to ensure both datasets display similar trends. It also uses the data to provide an overall view of the UK savings and pensions markets and the components that make it up.

   European Union’s Statistical Office (Eurostat): Use data to compile statistics at a European level to enable comparisons between countries.

   Organisation for Economic Co-operation and Development (OECD): Analyse investment activity to help formulate economic growth and financial stability recommendations for member countries.

   Trade associations, city analysts, institutional investors and fund managers use these data for modelling or forecasting purposes and also to track asset allocation trends. Academics and journalists also use the data for research purposes.

4. User engagement

   We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: Financial.Inquiries@ons.gsi.gov.uk or telephone David Matthews on +44 (0)1633 456756.

   There is a Business and Trade Statistics community on the StatsUserNet website. For more information, see background note 14.

5. International comparisons

   It is difficult meaningfully to compare the 'Investment by Insurance Companies, Pension Funds and Trusts' release with that of other countries. This is largely due to different rules and regulations surrounding insurance and pension provision, and also because other countries don’t combine data for these specific institutional groups into a single detailed publication. The focus for other countries is frequently on collecting the data for National Accounts purposes, not on producing a separate publication for these institutional groups.

   Many countries around the world use different sources to collect these data. In some cases the data collection is split between the national statistical office and the central bank (Belgium) or the industry regulator (Finland). The periodicity of data collection also varies between countries; some collect data quarterly (Sweden), others on an annual basis (New Zealand). In addition, some countries use a transactions approach (UK) to data collection, while others prefer a balance sheet style (Ireland).

   International bodies such as the Organisation for Economic Co-operation and Development (OECD) compare institutional investment data across countries to help formulate economic growth and financial stability recommendations.

6. Revisions

   Data for all quarters of 2012 remain provisional and subject to revision until the incorporation of the 2012 annual survey results in December 2013.

   A revisions policy (50.7 Kb Pdf) is available to assist users with their understanding of the cycle and frequency of data revisions. Users of this release are strongly advised to read this policy before using the data for research or policy related purposes. 

   Quarterly

   Revisions to the data for 2011 have been caused by incorporating the results of the 2011 annual insurance and pension funds surveys. As part of the processing of these results, discrepancies in the returns of individual respondents are identified and corrected by comparing their quarterly and annual returns.

   Total net investment in 2011 has been revised downwards to £24.3 billion from a net investment of £54.9 billion published last quarter. The most notable revision was in overseas securities, which decreased by £14.4 billion.

   Net investment for the first quarter of 2011 has been revised from £19.3 billion to £11.0 billion. In the second quarter a net investment of £14.6 billion was revised to £10.1 billion. In the third quarter net investment has been revised from £12.3 billion to £2.5 billion, and in the fourth quarter from £8.7 billion to £0.7 billion.

   The first and second quarters of 2012 have been revised, partly as a result of late questionnaires being received and partly as a result of disaggregate data revisions. In the first quarter of 2012, net investment has been revised from £37.6 billion to £24.6 billion, and in the second quarter from £20.6 billion to £9.1 billion.

   Revisions to data provide one indication of the reliability of key indicators. The table below compares the first published estimate for total net investment with the equivalent figure published three years later. The data starts with the first estimate published for Q4 2004 (in March 2005) and compares this with the estimate for the same quarter published three years later (in March 2008). The difference between these two estimates is calculated and this process is repeated for five years of data (all quarters up to Q3 2009). The averages of this difference (with and without regard to sign) are shown in the right hand columns of the table. These can be compared with the value of the estimate in the latest quarter. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows if the test is significant.

   Table 7: Revisions between first publication and estimates three years later

   £ billion

   	Value in latest quarter	Average revision	Average revision without regard to sign
   Total net investment	19.9	1.1	5.4

   Table source: Office for National Statistics

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   A spreadsheet is available giving a revisions triangle (343.5 Kb Excel sheet) of estimates from 1996 to date and the calculations behind the averages in the table.

   Annual

   The introduction of annual survey results with the third quarter figures each year leads to revisions of the published quarterly estimates, both to income and expenditure, and to transactions data. Revisions to transactions data are usually caused by problems with quarterly misreporting of data by businesses, which are identified as part of the quality assurance of the corresponding annual survey returns made by the businesses.

   For income and expenditure, the revisions are due to the incorporation of the annual insurance survey results, which are based on larger samples and also, generally reflect audited accounts. It is important to note that for both the pension funds and trusts sectors an annual income and expenditure survey is not undertaken.

   For each ‘set’ of surveys (for example, quarterly transactions and quarterly income and expenditure surveys for pension funds) there is a common sample, but each survey is conducted independently, which can result in different response rates. In some instances individual survey questionnaires are completed by different people within the same business, and with limited linkage within existing systems between the surveys at the individual respondent level. Therefore, there can be discrepancies at an aggregate level between the numbers emerging from the transactions and income and expenditure surveys. The set of annual surveys includes balance sheet data from the insurance companies and pension funds sectors. This allows the data to be ‘aligned’ so that transactions, income and expenditure and the balance sheet are consistent. The alignment process assumes that the transactions data are the weakest of the three strands of information and therefore takes the necessary adjustment. This assumption has been confirmed by contact with respondents when data have been queried. It is important to note that no alignment process is currently undertaken for the trusts sector.

   The following table shows the average absolute values and revisions (without regard to sign), over the last five years (2007 to 2011), arising from the take-on of the annual survey results. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows if the test is significant.

   Table 8: Average values and revisions (2007 to 2011)

   £ billion

   	Average absolute values	Average absolute revisions
   Long-term insurance companies
   Total income	186.7	11.1
   Total expenditure	197.2	6.6*
   Net investment	14.8	13.0*
   General insurance companies
   Total income	44.5	2.1
   Total expenditure	43.6	2.5
   Net investment	3.7	2.6
   Self-administered pension funds
   Net investment	10.8	12.1
   Total net investment	58.3	17.3

    

   Table source: Office for National Statistics

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   Methodological revisions

   This release contains new versions of reference tables (1.72 Mb Excel sheet) A, B, C, 6.1 and 6.2. Certain series within these tables have been revised back to the year 2000 as a result of the implementation of two methodological changes. An information note (367 Kb Pdf) has been published alongside this release, which serves to fully explain the changes and the reasons behind them.

7. Response rates

   The figures in this release are based on a system of quarterly and annual surveys collecting data on income and expenditure, transactions in financial assets and the balance sheet in separate surveys.

   Table 9: Overall response rate by survey

   Q3 2012		%
   Transactions
   Long-term insurance companies		91
   General insurance companies		95
   Self-administered pension funds		88
   Unit trusts		92
   Investment trusts		94
   Property unit trusts		85
   Income and expenditure
   Long-term insurance companies		91
   General insurance companies		95
   Self-administered pension funds		87
   2011 Annual		%
   Balance sheet
   Long-term insurance companies		100
   General insurance companies		99
   Self-administered pension funds		93
   Income and expenditure
   Long-term insurance companies		100
   General insurance companies		100
   Assets and liabilities
   Unit trusts		82
   Investment trusts		94
   Property unit trusts		85

   Table source: Office for National Statistics

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8. General information

   These points should be noted when examining reference tables (1.72 Mb Excel sheet) :

   Total pension contributions made to funded schemes cannot be derived by summing pension premiums from table 2.4 and contributions from table 4.3. To do so would result in double counting since pension business premiums in table 2.4 include any premiums (including transfers) received from self-administered pension funds and any transfers within the long-term insurance sector. More information on this and on other work undertaken to improve pension statistics as part of the 2002 pension contributions statistics review can be found on the ONS website. These pages include a discussion note (25.5 Kb Pdf) on how insurance companies have been recording pension transactions in the surveys used as a source for this release and on improvements made to the survey questionnaires from the first quarter of 2004 to prevent mis-reporting.

   • Certificates of deposits issued by overseas banks are included in short-term assets overseas.

   • An increase in borrowing is indicated by a positive figure, a decrease by a negative figure.

   • Total net investment for long-term funds includes investment by self-administered pension funds in insured funds.

   • Loans to a parent authority by local authority funds are included with UK local authority securities.

   • The consolidation adjustment is an adjustment to remove inter-sectoral flows between the different types of financial institution covered by this release. It has been calculated by identifying and calculating totals for net investment in mutual funds such as authorised unit trust units, investment trust securities and insurance managed funds by the institutions.

   • Components in tables denominated in £ billion may not sum to totals due to rounding.

9. Definitions and symbols used

   †   data have been revised since the last edition; the period marked is the earliest to have been revised

   ..   not available

   -    nil or less than £0.5m

   A glossary (211.8 Kb Pdf) is available to assist users with their understanding of the terms used in this release.

10. Disclosure

    It is sometimes necessary to suppress figures for certain items in order to avoid disclosing investment activity by individual institutions. In these cases the figures are usually combined with those for another item and this will be indicated in the tables by means of a footnote.

11. National Statistics

    The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics. Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs,

    • are well explained and readily accessible,

    • are produced according to sound methods,

    • and are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

     

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13. ONS business statistics

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14. Discussing ONS business statistics online

    There is a Business and Trade Statistics community on the StatsUserNet website. StatsUserNet is the Royal Statistical Society’s new interactive site for users of official statistics. The community objectives are to promote dialogue and share information between users and producers of official business and trade statistics about the structure, content and performance of businesses within the UK. Anyone can join the discussions by registering via either of the links above.

15. Special events

    ONS has recently published commentary, analysis and policy on 'Special Events' which may affect statistical outputs. For full details visit the Special Events page on the ONS website.

16. Release policy

    All data in this release can be downloaded free of charge from the ONS website. Here are the instructions to obtain a full time series of data from the statistical bulletin or release pages:

    • Select 'Data in this release',

    • Select 'View datasets associated with this release',

    • Select the latest release,

    • Select 'Select series from this dataset',

    • Select the reference table of interest,

    • Select 'View series',

    • Select the series of interest (Hint: for a custom download you can use SHIFT to select a range of series or CTRL to select multiple individual series),

    • Select 'View selection',

    • Select 'Download'.

17. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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