Scottish Widows has introduced a Corporate Bond Fund aimed at pension schemes in response to rising demands for long-dated gilt-edged securities.
The introduction of the fund also coincides with the move towards the minimum funding requirement (MFR) solvency test for pension funds, which has also pushed up demand for bonds as their inclusion in a revised MFR test looks likely.
The Corporate Bond Fund is the 21st addition to Scottish Widows' range of company pension funds but distinguishes itself from the rest by investing purely in the UK bond market.
Although the recent performance of UK bonds has been less than impressive, Scottish Widows is aiming to deliver a yield of at least 1.5 per cent at a relatively low risk when the bonds have matured.
According to Standard & Poor's Micropal, the Scottish Widows' Fixed Interest pension fund is ranked 98th out of 163 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years.