Fears about plummeting pension values has lead the number of people requesting retirement and transfer value quotes to rise by 63 per cent in September year-on-year.
Pensions company Aon Consulting put the rise in enquires in the last year down to panic resulting from turmoil in world financial markets.
Over the past year, pension funds have found themselves under attack, racking up big losses across a range of investments. Figures out last week from Aon calculate that the value of employees’ defined contribution pensions has dropped by nearly a third from £552bn to £395bn. Of the UK’s 200 biggest final-salary schemes, some 64 per cent, or nearly 130, are in deficit.
The figures can be broken down to those seeking retirement quotations, which increased by 60 per cent in September compared to the year before, and those seeking transfer value quotations, which rose by 74 per cent over the same period.
”The financial crisis, understandably, has made people extremely concerned about the state of their pensions, and rightly, they are making enquiries about where they stand and what their options are,” said Colin Hamilton, commercial director of Aon Consulting’s pensions administration team.
For employers the outlook is just as bleak. Marcus Hurd, head of corporate solutions at Aon Consulting. “Just as employers thought the economic news couldn’t get any worse, they are likely to be hit by more big bills to pay for their pension schemes when they can least afford it. If all final salary pension schemes were assessed for financial adequacy right now, then it is likely that contributions would soar by an additional £45bn a year for the next five years.
“The triple whammy of falls in global equity markets, the worsening economic outlook and reduced free cash means that companies are facing the toughest environment ever for final salary pensions.”
Small fluctuations in investment performance, particularly in shares, have always been par for the course and pension funds often recover from these dips relatively quickly. But for those nearing retirement, even for those with 10 years still to work , this extreme downturn – across all the major asset classes at the same time – may prove too extreme for them to be able to repair their pension pots.
This could lead to more people deciding to delay retirement for some years until markets recover.
