Investing in bonds has become increasingly risky with investment managers concerned Government bonds may fall in value.

Now Royal Bank of Scotland-owned Coutts, banker to some of the UK's wealthiest families, is reported to have issued a warning to its customers advising them to reduce their holdings in high yield bonds.

Latest statistics from the Investment Management Association (IMA) published this week shows that money has been flowing out of bond funds generally since the beginning of this year, while sales of equity funds have risen to their highest for nearly two years.

High yield bonds are at the riskiest end of the bond spectrum as they are issued by companies on lower credit ratings, but investors are compensated by higher rates of interest.

But now even UK gilts are seen as potentially risky, and after a period of strong returns from bonds, investors are switching back into shares.

Despite a growing concern that Government bonds are overpriced, some employees' retirement savings are still being moved automatically into gilts – just as many investors are moving their money out.

Employees who are within 10 years of retirement, whose pensions are invested in cash-based company pension schemes, or group personal pensions, often have their contributions placed in "lifestyle" funds.

These funds automatically switch employees' money into Government securities as they approach pension age.

Laith Khalaf at advisers Hargreaves Lansdown, explained: "The idea behind lifestyling is to protect investors against changes in annuity rates.

"This strategy has worked well in recent years as gilt prices have risen, but if they fall, and pension funds lose value, people may not be so happy."

High prices are the main reason investors are taking their money out of bond funds, as bonds are no longer seen as offering good value.

There are now fears that this situation could go into reverse, not least because the UK's triple-A credit rating so prized by Chancellor George Osborne is under threat.

Ian Spreadbury at Fidelity Investments, one of the UK's leading bond fund managers, said this week: "My concern is that there is now a chance of gilt yields rising (and prices falling) due to credit concerns over the UK Government."

Other managers are also pessimistic about gilts but point out that there are many other types of bonds available.

Phil Milburn, bond fund manager at Edinburgh-based Kames Capital, said: "Government bond yields have fallen to such a level that renders them expensive in nominal terms, and a really bad investment in real terms.

"However, fixed income is not one big amorphous mass.

"The correct combination of selective exposure and stock picking should still be able to produce a solid positive real return."

Most private investors who have bought bond funds for their Isas or other purposes do not hold pure UK gilt funds.

The funds which have sold best over the last few years have held a mixture of government bonds and bonds issued by companies, or they have been invested purely in corporate bonds.

Patrick Connolly at independent financial advisers AWD said: "Selling in a panic is rarely the right thing to do. We are still investing our clients' money in fixed income funds as we regard bonds as part of a balanced portfolio, although we are reducing holdings in some cases and moving investors into equity funds which look better value or into cash if they want a lower risk approach."

He suggests investors could switch to strategic bond funds which spread their investments across different types of bonds.

Barry O'Neill, investment director at Carbon Financial Partners in Aberdeen, added: "People predicted a bloodbath in the bond markets at the beginning of last year and the year before and it didn't happen. They may be right this time, but we take a strategic rather than a tactical approach so we have not stopped allocating money to bonds. We do this to dampen portfolio volatility so we focus on funds investing in high quality, shorter-dated global bonds."

Even if Government bond prices do start to fall, decreases are likely to be limited. Jason Hollands of investment advisers Bestinvest said: "A major reappraisal of bonds will likely only happen when investors believe the interest rate cycle is about to change and I can't see that happening any time soon."

Not all high yield bonds are high risk either according to Donald Phillips, manager of Baillie Gifford High Yield Bond fund.

He said "The downside risk with these bonds is that companies default but we are stock pickers so we look very carefully at the issuing companies before we invest."

Pension investors meanwhile may be able to switch out of lifestyle funds says Mr Khalaf. "If you are between five and ten years from retirement, you could consider an absolute return fund such as Newton Real Return or Standard Life GARS, but if you have only two to three years, you could consider cash which would protect the nominal value of your fund."