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. Quarterly balance sheet data for short-term assets and liabilities are also reported. Income and expenditure data are provided for insurance companies (quarterly and annual) and self-administered pension funds (quarterly).
In addition, every third quarter release contains annual balance sheet data for all sectors, providing information on the market value of assets and liabilities.
The total assets of the businesses covered by this release were valued at around £3,000 billion at the end of 2010, 10 per cent up on the level at the end of 2009. On average in each quarter of 2010, these businesses acquired and disposed of nearly £400 billion of assets. Net investment is the difference between these substantial levels of acquisitions and disposals and can therefore be volatile.
Net investment is estimated to have been £16 billion in the third quarter of 2011, a similar level to the two preceding quarters. So far in 2011 (that is, the first three quarters taken together) net investment is estimated to have been £49 billion. That is, at an annual rate of around £65 billion, a similar level to the (revised) 2010 level of investment.
Within that, short-term assets have been close to flat since the end of 2007. Each of the last three years has seen some reduction but that has been at a level under £10 billion in each year. This is much lower than the average increases of almost £30 billion a year in the 2005 to 2007 period. The latest figures suggest that the pattern of little change is continuing in 2011.
Transactions in British government sterling securities (Gilts) were estimated to have been broadly flat in the third quarter of 2011. Net investment in the first three quarters of 2011, taken together, is estimated to have totalled only £4 billion. This compares with a positive net investment of £29 billion in 2010. The reduction may in part reflect the falling yields from Gilts.
There has been disinvestment in UK corporate securities in most quarters in the last two years (that is, disposals are estimated to have exceeded acquisitions). That continued, at a low level, in the third quarter of 2011.
In contrast, investment in overseas securities continued to be positive in the third quarter of 2011, as it has been at least since the beginning of 2009. Annually, this series has been positive in each year for at least the past 25 years (and quarters when it has been negative have been rare).
Investment in 'Other assets' has been similarly positive for a long period, and remained so in the third quarter. This series includes mutual fund investments. In most of the last few years, the net investment in these assets has been higher in the second half of the calendar year than in the first. In line with that, the third quarter 2011 figure of almost £14 billion was higher than for either of the two preceding quarters.
|Short-term assets||British government sterling securities||UK corporate securities||Overseas securities||Other assets||Total|
r = revised data
p = provisional data
Net investment by long-term insurance companies was provisionally estimated at around £3 billion in the third quarter of 2011, in contrast to disinvestment in the previous two quarters of the year. Revisions as a result of the annual 2010 balance sheet survey have meant that it is now estimated that long-term insurance businesses were, net, buying assets in each quarter of 2010, so the disinvestment seen in the first half of 2011 was untypical (they were two of the only four quarters of disinvestment in the last six years).
Net investment by general insurance companies is also estimated to have been around £3 billion in the third quarter of 2011. The figures for net investment have, of course to be set alongside the levels of assets for this sector. General insurance companies are estimated to have had assets of £142 billion at the end of 2010; the assets of long-term insurers are estimated at £1,324 billion (see Table B (37.5 Kb Excel sheet) ).
Investment by self-administered pension funds is estimated to have risen in the third quarter from its low second quarter level. Since the beginning of 2010, these figures have been volatile. A disinvestment in the first half of 2010 was followed by an appreciable investment averaging just under £15 billion a quarter over the next three quarters, since when investment levels have been more modest.
Over the last three years, net investment by investment trust businesses is estimated to have been broadly flat and this continued in the third quarter of 2011. In contrast, net investment by unit trusts and property trusts has been running at just under £10 billion a quarter in the first three quarters of 2011. This is a similar level to those experienced in 2009 and 2010, which was higher than in the preceding years.
|Insurance companies||Self-administered pension funds||Trusts||Consolidation adjustment1||Total|
|Long-term||General||Investment||Unit & Property Unit|
The consolidation adjustment is an adjustment to remove inter-sectoral flows between the different types of institutions covered by this statistical bulletin. The adjustment includes (i) investment in authorised unit trust units and investment trust shares by insurance companies, pension funds and trusts and (ii) investment by pension funds in insurance managed funds.
r = revised data
p = provisional data
Long-term insurance premiums were, at just under £27 billion in the third quarter, at their average level for 2011. They are running at a similar level, or slightly below, last year. However, the level of premiums in 2010 was lower than in any of the preceding five years.
The level of long-term insurance claims was, at £32 billion in the third quarter, rather lower than in other recent quarters. As has been the case since 2008, it exceeded the level of premiums.
For general insurance, premiums continued to be higher than claims. The levels of each have reduced slightly since 2008.
On the other hand, payments by self-administered pension funds continued at a high level in cash terms in the third quarter. This was the sixth quarter out of the last seven that payments have exceeded £12 billion. Contributions, on the other hand, are estimated to have been just under £10 billion in the quarter, unchanged from the previous period.
|Long-term insurance||General insurance||Self-administered pension funds|
r = revised data
p = provisional data
At the end of 2010, institutions' total assets were valued at £3,043 billion compared to £2,768 billion at the end of 2009. The rise of 10 per cent 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 each asset type. Short-term assets increased by 11 per cent while the value of British government sterling securities (Gilts) rose by 9 per cent.
A number of observations arise through analysing and comparing some of the asset types (see Table A (57 Kb Excel sheet) ) that underpin the categories 'UK corporate securities' and 'Overseas securities'. Even though there was disinvestment in UK ordinary shares during 2010, the value of holdings increased, by 8 per cent. This will have reflected the increase in UK share prices through 2010 (for example the FTSE share index rose by around 10 per cent between the end of 2009 and 2010). UK ordinary shares represent around one-sixth of all assets by value held by these institutions.
For the first time since the series began, in 1964, the value of overseas ordinary shares held by these institutions in 2010 exceeded the value of UK ordinary shares. As recently as 2001, the value of UK shares held was more than double the holding of overseas shares, but since then the value of holdings of UK shares has reduced by almost a quarter in cash terms while holdings of overseas shares have grown sharply by value.
In contrast to the appreciable rises in the values of both UK and overseas ordinary shares, the 'Other' categories - largely bonds and preference shares - showed only slow growth of 2 per cent in 2010.
The value of overseas government securities held increased by 5 per cent in 2010 (compared to the 9 per cent rise in holdings of UK Gilts).
UK loans and mortgages account for only around 7.5 per cent of asset holdings. Their value rose by 3 per cent in 2010, slower than the average of 10 per cent for all assets taken together.
The sharpest increase in 2010 was in the 'Mutual funds and other assets' category. The main constituent of this tends to be mutual fund investments. It is now a large category, accounting for almost one-fifth of all holdings. The value of the holdings in this category rose by 15 per cent in 2010.
|Short-term assets||British Goverment sterling securities||UK corporate securities||Overseas securities||Other assets||Total|
|UK securities||Overseas securities|
|Government sterling securities||Ordinary shares||Other1||Government securities||Ordinary shares||Other1|
|UK loans and mortgages||UK land, buildings and new construction||Mutual funds and other assets 1|
The annual surveys give a rather fuller view of financial activity in these institutions than can be obtained from the quarterly surveys, which sometimes have to be estimated. 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 slightly under £6 billion. In the years 2008 to 2010 (when markets have been more fluid) they have averaged £17 billion.
For 2010, ONS now takes the view that total net investment by these institutions was £71 billion. That is some £25 billion greater an estimate than before the data from the annual surveys were available. It is the result of new information from a considerable number of businesses, many of which (particularly in the insurance sector) now take the view that their net investment during the year was at higher levels than their first estimates.
Both acquisitions and realisations are now seen as having been at slightly higher levels than first estimated. The revision for acquisitions by all businesses in the sectors covered by this release was around 2.5 per cent and realisations are now seen as being 1.8 per cent higher than before. The difference between the two is now £11 billion greater than previously estimated.
In addition, short-term assets are now estimated to have been around £5 billion higher by the end of 2010 than previously published, while new information affecting the consolidation adjustment resulted in adding a further £10 billion to total net investment. The consolidation adjustment effectively nets off the inter-trading between the sectors covered in this release. New information can cover, for example, asset classification issues between UK and overseas.
These are active in both life insurance and non-life (general) insurance and 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. Fully insured funds are excluded from the self-administered pension funds survey. Insurance managed funds are also included in the self-administered pension funds statistics.
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 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. 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.
The figures cover investment trusts recognized as such by HM Revenue & Customs for tax purposes and some unrecognized 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.
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 (e.g. 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.
Basic quality information
Quality and Methodology Information (QMI) report (268.3 Kb Pdf)
can be found on the 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.
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 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,
Department for Work & Pensions,
HM Revenue and Customs,
Association of British Insurers,
The Pensions Regulator,
Department for Business, Innovation and Skills,
Financial Services Authority,
European Union's Statistical Office (Eurostat),
Organisation for Economic Co-operation & Development (OECD),
European Central Bank,
Trade associations, city analysts, forecasters, institutional investors and fund managers,
Academics, students and journalists.
Revisions to the data for 2010 have been caused by incorporating the results of the 2010 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 2010 has been revised upwards to £71.1 billion from a net investment of £45.7 billion published last quarter. The most notable revision was in UK corporate securities, which increased by £9.3 billion.
Net investment for the first quarter of 2010 has been revised from £12.2 billion to £4.2 billion. In the second quarter a net disinvestment of £1.3 billion was revised up to a net investment of £7.1 billion. In the third quarter net investment has been revised from £18.5 billion to £29.5 billion, and in the fourth quarter from £16.4 billion to £30.4 billion.
The first and second quarters of 2011 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 2011, net investment has been revised from £22.1 billion to £18.9 billion, and in the second quarter from £15.6 billion to £14.0 billion.
Revisions to data provide one indication of the reliability of key indicators. The table below shows summary information on the size and direction of the revisions made to the data over a five year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant. The table covers estimates of combined total net investment first published from March 2004 (for 2003 Q4) to December 2008 (2008 Q3).
|Value in latest period||Average revision over the last 5 years||Average revision over the last five years without regard to sign|
|Total net investment||16.1||0.6||5.3|
A spreadsheet is available giving a revisions triangle (117 Kb Excel sheet) of estimates from 1996 to date and the calculations behind the averages in the table.
The introduction of the annual results with the third quarter figures each year leads to revisions, both to income and expenditure and to transactions in assets. For income and expenditure these are due to the incorporation of the annual insurance survey results which are based on larger samples and also, generally, audited accounts. For transactions data, they are due to problems with misreporting by companies in the quarterly series that are identified as part of the quality assurance of the annual data.
For each set of surveys (for example; the quarterly survey into pension funds transactions in financial assets and the quarterly survey into pension funds income and expenditure) there is a common sample, but each survey is conducted independently, resulting in different response rates; the forms are sometimes completed by different people within the business; and there is limited linkage within the existing systems between surveys at the individual respondent level. Therefore, there can be discrepancies at an aggregate level between the numbers emerging from the income and expenditure survey and the transactions survey. The set of annual surveys includes balance sheet data from the three sectors and this allows the figures to be aligned so that income and expenditure, transactions 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 take the necessary adjustment. This has been confirmed by contact with respondents when figures have been queried.
The following table shows the average absolute values and revisions (without regard to sign), over the last five years (2006 to 2010), arising from the take-on of the annual survey results.
|Average absolute values||Average absolute revisions|
|Long-term insurance companies|
|General insurance companies|
|Self-administered pension funds|
|Total net investment||72.8||12.0|
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.
|3rd Quarter 2011||%|
|Long-term insurance companies||96|
|General insurance companies||95|
|Self-administered pension funds||87|
|Property unit trusts||92|
|Income and expenditure|
|Long-term insurance companies||93|
|General insurance companies||93|
|Self-administered pension funds||86|
|Long-term insurance companies||99|
|General insurance companies||96|
|Self-administered pension funds||92|
|Income and expenditure|
|Long-term insurance companies||100|
|General insurance companies||98|
|Assets and liabilities|
|Property unit trusts||100|
These points should be noted when examining data tables:
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 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 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.
Figures in tables denominated in £ billion may not add up because of rounding.
As of the first quarter of 2011, within table B, new annual series identifiers for total asset holdings reported by insurance companies and self-administered pension funds have been introduced (RKBI, RKBY and RYIR), which reflect the more comprehensive data collected by the annual surveys rather than the less detailed quarterlies. The data are now consistent with those appearing in tables 2.3, 3.3 and 4.2. These changes required a new series to be created for total asset holdings covering all the sectors (KI2V). There was also a knock on effect to table A, where new identifiers were needed to ensure the correct data for the following series continued to be reported: other assets (KI2W), net inflow to life insurance and pension funds (KI2X) and other residual (KI2Y).
Details of the policy governing the release of new data are available from the Media Relations Office.
National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.
© Crown copyright 2011.
You may use or re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence, write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: email@example.com
These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.
Definitions and symbols used
r revised data
p provisional data
† 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
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.
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: firstname.lastname@example.org
|Stephen Curtis||+44 (0)1633 456626||Financial Inquiriesemail@example.com|