The value of pension funds has been reduced by £157bn over the past 12 months as a result of the slump in global stock markets.

“Defined contribution” or “money purchase” pension schemes have seen the funds available to them fall from £552bn to £395bn over this period, according to a report by Aon Consulting. This means that the value of the pension pots of the almost four million British workers who make monthly contributions to their pensions has fallen by 28% - even though a total of £6.7bn has been paid into defined contribution pensions by employees and employers during the past year.

One consequence of this disastrous situation is that many people approaching retirement age may have continue working, as the resources they thought they would have are no longer there. Aon prefers to look on the bright side and point out that mot workers are not in that situation, and have many years to wait for the stock markets to recover.
 
The government-funded Pensions Advisory Service warned earlier this month that millions of people were being encouraged to take too much risk with their pensions.
It said workers who paid into pension schemes which invested heavily in shares might not have been aware of the risks.

MPs and public employees on “final salary” or “defined benefit” pensions are not affected. 

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