February brought yet more woe for Britain's defined contribution (DC) with asset losses of ten per cent, equivalent of £42bn, according to Aon Consulting.

The Aon DC Pension Tracker has shown a fall from £410bn at the end of January 2009 to £368bn at the end of February. Since the start of the credit crunch in September 2007, DC pension assets have slumped by 33 per cent, to £182bn.

Worsening annuity rates have seen projected pensions fall by around 40 per cent (based on an individual aged 60 with a £25,000 salary).

"The double whammy of falls in equities and worsening annuity rates have hit DC pension scheme savers hard," said Helen Dowsey, principal at Aon Consulting. "People need to take an active role in reviewing their pensions to deal with the current situation.

"For those facing retirement in the near future, particularly those who have not started switching out of equities as part of a lifestyle strategy, the situation looks bleak and they need to consider all the options open to them. For example, by shopping around for the best annuity, people can obtain annuity rates that might be up to 30 per cent higher than that offered as a default by their pension provider."

Dowsey said Aon is encouraging people to be creative in their approach to retirement. She suggested converting only a portion of a pension fund to an annuity now, saving the remainder for conversion at a later date. "Or, it may be possible to continue to be in paid work post retirement, although the recent European Court of Justice decision to allow mandatory retirement ages in UK will impact the number of older employees who can remain in their jobs after the age of 65."

- Pensions Age March 2009

Share Story: