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Release: MQ5: Investment by Insurance Companies, Pension Funds and Trusts, Q3 2013

Released: 20 December 2013 Next edition: 19 March 2014

Contact

David Matthews

Business Outputs and Developments Division

Financial.Inquiries@ons.gsi.gov.uk

Telephone: +44 (0)1633 456756

Categories: Economy, National Accounts, UK Sector Accounts, Pension funding

Frequency of release: Quarterly

Language: English

Geographical coverage: UK

Geographical breakdown: UK

Survey name(s): Quarterly Survey of Insurance Companies: Long-term Business Income and Expenditure, Quarterly Survey of Insurance Companies: Long-term Business Transactions and Balances, Quarterly Survey of Insurance Companies: General Business Income and Expenditure, Quarterly Survey of Insurance Companies: General Business Transactions and Balances, Quarterly Survey of Pension Funds: Income and Expenditure, Quarterly Survey of Pension Funds: Transactions and Balances, Investment Trusts Quarterly Return of Transactions, Unit Trusts Quarterly Return of Transactions, Property Unit Trusts Quarterly Return of Transactions, Annual Survey of Insurance Companies: Long Term Business Balance Sheet, Annual Survey of Insurance Companies: Long Term Business Income and Expenditure, Annual Survey of Insurance Companies: General Business Balance Sheet, Annual Survey of Insurance Companies: General Business Income and Expenditure, Annual Survey into Pension Funds: Balance Sheet, Investment Trusts Annual Return of Liabilities and Assets and Overseas Income and Interest Paid, Unit Trusts Annual Return of Liabilities and Assets, Property Unit Trusts Annual Return of Liabilities and Assets

  • Total net investment by insurance companies, pension funds and trusts is estimated at £31 billion in the third quarter of 2013. This is markedly higher than the five year average for this quarterly series of £14 billion and is the largest quarterly estimate since Q2 2009.

  • The net investment data for Q3 2013 shows that businesses are making use of differing investment strategies at a time of financial uncertainty. Net investment in short-term assets was strong (£11 billion), indicating that some businesses chose to favour liquidity rather than longer-term investment strategies. However, businesses continued to invest in gilts (£7 billion), usually a strategy undertaken to avoid the volatility of equity markets.

  • In Q3 2013, net investment in overseas securities continued to be strong (£12 billion) in comparison with net disinvestment of £7 billion in UK corporate securities. This indicates that businesses may have more confidence in their ability to make money from overseas securities than they do from UK corporate securities.

  • The level of net investment by self-administered pension funds in Q3 2013, at £17 billion, is the highest recorded estimate since quarterly records began in 1983.

  • This release reports on these institutions’ balance sheets at the end of 2012. Total assets were valued at £3,284 billion compared with £3,010 billion at the end of 2011.

This release presents information about the investment choices of insurance companies, self-administered pension funds, investment trusts, unit trusts and property unit trusts. Reported in this release are quarterly net investment data arising from financial transactions (investments) made by these institutional groups. 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 at current prices (effects of price changes included).

Every Q3 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.

A question often asked of the MQ5 release is ‘why does it only cover certain institutional groups?’  The answer is that these institutions control a substantial level of assets (over £3 trillion) and engage in significant volumes of investment activity to fund their operations. An understanding of their investments and assets is important in order to monitor the stability of the financial sector and is a key contribution to the UK National Accounts.

Over the next few years, changes to surveys covering the financial sector will be necessary to ensure ONS becomes compliant with the revised European System of Accounts 2010 (ESA10). Once the changes have been made and ‘bedded in’, ONS will consider expanding the MQ5 release to cover other parts of the financial sector, such as securities dealers and businesses engaged in the provision of financial services.

ONS makes every effort to provide informative commentary on the data in this release. As part of the quality assurance process, individual businesses are contacted in an attempt to capture reasons for extreme period on period data movements. It can prove difficult to elicit detailed reasons from some businesses to help inform the commentary. Frequently, reasons given for data movements refer to a ‘change in investment strategy’ or a ‘fund manager’s decision’. Consequently, it is not possible for all data movements to be fully explained.

ONS 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. Comparing the first published estimates of total net investment with the equivalent estimates published three years later, the average quarterly revision (without regard to sign) is £5.7 billion.

The estimate of total net investment for Q2 2013 (last quarter) has been revised downwards by £8 billion from £35 billion to £27 billion (see background note 6 for further information).

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

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

Content from the Office for National Statistics.
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