The £375m fixed-interest deposit pension fund has 10 per cent invested in commercial and residential mortgage-backed securities, while the £86.5m fixed-interest deposit life fund has almost 5 per cent in mortgage-backed securities and 2.5 per cent in other corporate floating rate notes.
The pension fund was also exposed to Lehman Brothers, but the holding was taken out after the bank collapsed in September with no loss to the fund, the firm says.
Both funds are managed by Threadneedle, which saw its own money market fund plunge 10 per cent last year.
Zurich says volatile mark to market values for these assets prompted it to dip into shareholder funds rather than inflicting falls in value on the funds’ investors, like other firms have done.
Investment management director Paul Wright says: “We are not obligated to support this fund but we have chosen to use shareholder money to protect these customers, many of whom are about to switch into an annuity. It is right and proper what we are doing. While we cannot make any promises going further I am happy with where we are at.”
The move follows a 3.6 per cent markdown of three of Zurich’s offshore money market funds in September, as a result of exposure to Lehman’s.
It also comes after Standard Life paid up £100m to compensate pension sterling fund investors who lost out after its shock revaluation saw 5 per cent wiped off the value of their holdings.