UK Pension Deficit Returns

Troubled UK pension funds have suffered significant losses with prolonged negative stock market trading, according to a report released today.

The report published by Aon Consulting covered 200 of the UK’s top employer final salary pension plans, and reflected losses of around £26 billion by the end of trading on Thursday.

The pension funds, linked largely to stock investment portfolios, have been hit dramatically by the ongoing decline in major world stock markets this week, resulting in a large deficit at the present time.

This comes only weeks after a report announced pension funds had made progress in returning to surplus for the first time in years.

With credit anxiety reaching epidemic proportions worldwide, and banks continuing to suffer as a result of the growing US sub-prime lending problem, stock market investors have stayed at home, with major sell-offs around global markets.

Analysts are concerned that stock markets could continue this week’s downward trend for the foreseeable future, at least until the true magnitude of the disastrous US sub-prime crisis is uncovered.

For struggling pension funds, this means potentially even further deficits could be on the way, leaving retiring employees eventually out of pocket.

And with no immediate turnaround on the horizon, it would take a brave portfolio manager to retreat entirely with current losses.

However, Aon Consulting have advised markets to take today’s news with caution, bearing in mind the same pension funds were staring at a £40 billion deficit at the turn of 2007, and £80 billion during 2006.

Employer pension funds have seen ongoing deficits for a number of years, through downward investments and poor management. Whilst today’s figures may be bad news for those on the verge of retirement, analysts have predicted the tables to turn eventually to restore a positive balance to the UK’s top pension funds.

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