Drastic falls in pension fund scheme

Brett Alegre-Wood
March 4, 2009

Pension Fund Schemes fall,

There has been a lot of discussion regarding pensions over the last week, with particular emphasis on one man's pension plan, but unfortunately, the majority of us will never be as lucky as Sir Fred Goodwin to receive a £703,000 a year pension. Even more unfortunately, the majority of us don't really know how well our pension funds are performing.

Reports regarding the dismal state of the Royal Mail pension fund scheme that could see the deficit rise to as high as £9 billion is just one example in multitudes of the worsening pension crisis. As most pensions perform through stock market investments, many people saving into a performance-based pension have seen the value of their assets fall by almost a third since the beginning of the credit crunch.

Reports from the Pension Protection Fund 7800 Index for February 2009 estimate an aggregate funding shortfall of almost £200 billion, with 90% of the total defined-benefit schemes in the sample showing a deficit. In March last year the same pension schemes had a positive aggregate balance of £67.8 billion. In these pension schemes the onus to provide a pension income is on the employer and therefore the employee should not be affected, however pension plans where the employee takes the risk have not fared any better, with defined-contribution schemes dropping by £140 billion since September 2007.

Neither have personal pension funds been spared embarrassing losses.

In January, the Pension Sterling Fund managed by Standard Life alone plummeted by 4.8% in one day, an average loss of £1000 per customer. Whilst Standard Life has agreed to spend £100 million to compensate customers who believed they were investing in a supposedly safe cash fund, most people will not have the luxury of ambiguous scheme information to claim reimbursement.

These recent changes in pension performances could leave you with significantly less savings than you previously expected and seriously compromise your lifestyle choices in retirement. For example Aon Consulting calculates that a 60 year old paying 10% of a £25,000 salary into a defined contribution scheme planning to retire at 65 will only receive an annual salary for life of £10,900, compared with £17,100 forecast in September 2007. That equates to a 30-36% drop in pension value for those aged 55-65. Younger workers investing in defined contribution pensions will see slightly less of an impact, with employees between 40-55 experiencing a 20-30% drop in their pension funds and those under 40 seeing up to a 20% decrease in their pension pot.

All this could leave many people in very difficult and desperate situations if they are not made aware in time to start making plans for alternative provisions.

Hopefully you will not be one of them.



Property Videos, UK Pension

Our Picks - Regeneration Hotspots

We Give You First Access & Negotiate Discounts on london and UK Property Development in the latest Regeneration Hotspots.










Current Developments

Related Property Articles & News

Could UK Property Prices Drop 40%?

Could UK Property Prices Drop 40%?

One Great Property Idea

How Property Investors with Little Time Can Invest in New Build and Off Plan Property using a Regeneration Strategy and Where Exactly to Invest.


530pm London GMT


1230pm London GMT

Property Investment... Effortlessly Done For You!