Pension fund ratios eroded during first half of the year

The investment bank’s pension fund solvency indicators found the typical fund saw its solvency ratio eroded by falling asset values and rising inflation expectations.

It found UK funds were the worst hit, with solvency levels falling 13pc in the six months to June 30 while German funds lost 9.7pc and Dutch funds fell by just 8.3pc.

Lehman Brothers head of the European Pensions Advisory Group Alan Rubenstein said: "These figures show the impact which falling equity and credit markets have had on pension funds across Europe.

"They are also a reminder of the difference which hedging and asset allocation can make to fund performance."

He added: "In the UK, funds which hedged their liabilities saw funding levels fall by 4pc less than those that did not.

"And the relative resilience of Dutch pension schemes highlights the value of diversifying portfolios through alternatives".