Private pensions hit by credit crunch
Research carried out by Aon, the insurer and pension provider, has found that the value of private pension savings in the UK have been badly damaged by the credit crisis and the recession.
Aon calculates that 3.7 million people in the UK are affected and since the beginning of October 2007, their defined contribution savings have dwindled by almost 30%.
This represents a fall of from £552 billion to £391 billion, racking up a loss of £161 billion, over the period.
Aon’s research, which was carried out for the BBC, also established that final salary pensions have been affected.
The latest information from the Pension Protection Fund puts the combined deficit of almost 7,800 final-salary schemes in the private sector at £219 billion in February, with 91% of schemes now in deficit.
The falls are also attributed to the severe decline in share prices.
However, while the figures may discourage some from saving for their retirement, Joanne Segars from the National Association of Pension Funds explains that confidence is slowly returning and “that pensions were still the best way to save for retirement“.
In related news, Aon’s UK division announced yesterday it was proposing to cut the contribution it makes to employees’ pensions as part of a cost reduction strategy.
The firm has already closed its final salary scheme and according to a BBC report is now proposing to reduce the level of its employer contributions by up to a half.
Aon is believed to be the first major UK employer to be cutting its pension contribution in response to credit crisis losses and the economic slowdown.