A stark shift away from investing in equities contributes to pension fund deficits and making stock markets more volatile, according to fund manager Vincent McEntegart.
The manager at Kames Capital said historically UK pension funds had been the "natural buyer" of UK shares, as they owned equities to grow the size of the pension pot and meet future liabilities.
Bur Mr McEntegart said: "In recent years this has changed, pension funds are now focused on liability driven investing, and that means they buy more bonds and fewer equities, the effect of this has been seen in recent years in that the lack of equities in favour of bonds has caused there to be a deficit, and then it is falling on the company to put more money into the fund."
He said this practice means UK shares are more volatile, because historically when the market fell as it did in December, pension funds that buy equities on a regular basis would step in and the result would be that the declines in share prices would be generally less severe.
Mr McEntegart runs the £600m Kames Diversified Monthly Income fund, which invests in both bonds and equities.
He added that companies which then have to pay more into the pension fund to cover the deficit have less cash with which to pay shareholders, making some equities less attractive, and creating a vicious circle.
John Chatfeild Roberts, who jointly runs the Merlin range of funds at Jupiter, has said he believes a major cause of the increase in pension fund deficits has been the fall in bond yields caused, in part, by the policy of quantitative easing, whereby central banks buy bonds in order to force the price down.
He said with less income coming from bonds, pension fund deficits rose.
Steven Cameron, pensions director at Aegon, said: "Overall pension schemes’ ownership of the UK equity market has dropped from almost 22 per cent in 1998 to 3 per cent at the end of 2016.
"For active defined benefit schemes, liabilities increase with salary. Here, equities, which offer real returns, are a suitable matching investment. There are now very few DB schemes certainly in the private sector which are active and open to further accrual.
"When schemes become 'paid up', the liabilities no longer increase in line with salaries, but are instead fixed in real terms. This changes appropriate liability driven investing and many employers are keen to match liabilities as closely as possible to avoid unexpected shocks to their balance sheets as a result of the pension scheme. This explains why DB schemes are less significant equity investors.
"However, as DB declines, defined contribution schemes including master trusts continue to grow. The vast bulk of scheme assets are held in default funds which typically have high equity weighting, eg the Aegon default fund has 75 per cent equity.
"At an individual level, since pension freedoms were introduced in 2015, many more individuals are shunning annuities and are instead remaining invested and drawing an income in retirement.