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| The
first choice for people
in pensions |
| Calm
urged in face of massive Defined Contribution losses
By Sophie Baker |
| Employees
enrolled in defined contribution (DC) pension schemes have been urged
not to panic after it became apparent late last week that DC schemes
have made massive losses in the past year. According to one estimate from Aon Consulting, around £157bn has been wiped off the value of DC schemes over the last 12 months. Aon also revealed that this drop has occurred despite employers and employees of DC schemes having paid in £6.7bn worth of contributions between October 2007 and October 2008. In October 2007, the value of DC pensions stood at just over £552bn, but the following year this dropped by almost a third to around £395bn. The consultancy firm warned that this could mean those who are near to retirement age may be forced to work longer. The drop has been blamed on the economic downturn which, Aon says, is now visibly taking its toll on the money employees had set aside for their pension. “It may appear a double blow to workers that not only are they facing more of a struggle to make ends meet, but the economic turmoil is also seemingly eating into the money they have been putting aside for retirement,” commented Helen Dowsey, principal in the benefit solutions division of Aon.“However, most workers will have the fortune of time on their side as their retirement will be many years away, enough time to weather the current storm.” Dowsey urged those close to retirement to seek professional advice on their options, and cautioned against thinking the grass may be greener out of equities: “Many may be tempted to switch their pension assets held in equities at low value and move into cash but it’s not a good time to do this whilst equity markets are falling – it effectively consolidates losses. For some it may be a question of delaying retirement,” she added. - Pensions Age October 2008 |