Cash holdings fell to 3 per cent of portfolios at the end of the year from 4.7 per cent a year earlier, as fund managers moved money into shares after the devaluation of sterling on 16 September.
The Minet confidence index, reflecting movements in pounds 11.5bn of personal pension portfolios, jumped from 95.1 at the end of September to 152.5 three months later.
The previous high in December 1988 was followed by a 30 per cent rise in the FT-A All-Share index. But Minet warns that past performance is not necessarily a guide to the future.
Ian Chalmers, who compiled the index, says institutions drove up the stock market in 1992 but 'from now on private investors will have to be the driving force'.
Bank and building society deposits total pounds 350bn. Following cuts in interest rates, there are signs that private investors are switching money out of deposit accounts and into gilts and shares.
They have been attracted by tax benefits of personal equity plans and the introduction of guaranteed products, which limit investors' potential losses from investing in shares.
Fund managers that have cut the proportion of funds in cash include Sun Alliance - down from 9 to 1.1 per cent over the quarter - and Target Life, which cut its cash holding from 10.4 to 4.1 per cent.
Other fund managers taking part in the survey included Legal & General, Allied Dunbar and Standard Life.
Funds surveyed held on average 60 per cent of their assets in UK shares, 23 per cent in overseas shares and 10 per cent in bonds. They held a further 4 per cent in property and index-linked securities.
Of those studied by Minet, the best performer in 1992 was Abbey Life, with a gain of 20.7 per cent. The worst was Confederation Life with 12.6 per cent.
The move out of cash is likely to be reflected in figures for occupational pension fund portfolios. According to WM Company, which measures fund performance, these funds had an average of 4 per cent of their portfolios in cash at the end of September.
WM's figures showed an average of 57 per cent in UK shares, 21 per cent in overseas shares, 5 per cent in UK bonds - principally gilts - and 4 per cent in overseas bonds.
The bond holding hardly changed over the year despite a number of fund managers' publicly declared belief that bonds would become more popular in a period of low economic growth.
The return - capital growth and income - on UK shares was 20.6 per cent last year. It was 17.1 per cent on UK bonds and 29.2 per cent on overseas bonds.Reuse content