After producing negative returns of 3 per cent up to the end of August, they ended the year showing average returns close to 20 per cent, according to separate reports from Hymans Robertson, consulting actuaries, and the WM Company.
UK equities posted a 21 per cent return, mainly concentrated in the fourth quarter of the year following Black Wednesday, while a lower pound helped to produce returns of 20 per cent from overseas equities.
However, net new money available for investment sank to a low of 3 per cent of assets. And with UK dividends falling by 5 per cent in real terms, the first such fall since 1980, mature pension funds may have to realise capital to finance benefits in 1992, according to the WM Company.
Among overseas markets, North America and the Pacific Basin led the way with returns of 33 per cent. The pound's decline reduced a 22 per cent fall in the return on Japanese equities, expressed in local currency, into a mere 3 per cent shortfall in sterling terms.
Although UK and overseas bonds produced far better returns than equities from 1990 to 1992, supporting predictions that the Nineties would be the 'decade of the bond', pension funds have increased their exposure to equities. These account for 80 per cent of their assets - 60 per cent in the UK and 20 per cent overseas.
Average returns on pension fund investment over the past 10 years are 14 per cent and over the past five years, 12 per cent.