The £375m fixed-interest deposit pension fund has 10 per cent invested in commercial and residential mortgage-backed securities and the £86.5m fixed-interest deposit life fund has almost 5 per cent in mortgage-backed securities and another 2.5 per cent in other corporate floating-rate notes.
The pension fund also had a 3.49 per cent holding in Lehman Brothers, which was taken out after the bank collapsed last September.
Both funds are managed by Threadneedle, which saw its own money market fund plunge by 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, who are generally approaching retirement.
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. What we are doing is right and proper.”
The move follows a 3.6 per cent markdown of three of Zurich’s offshore money market funds last September as a result of exposure to Lehman Brothers.