GLOBAL - The total value of pension assets managed globally fell by 18% to an estimated US$25trn in 2008, latest figures show.
The UK return of -10% was less negative due to declining exposure to equities and the falling value of sterling which lifted the value of income on overseas investments.
The UK remained the second largest market at end-2007, with pension assets totaling $3.3trn, accounting for 11% of total assets worldwide. UK assets are only exceeded by the US market, where assets of $19.6trn made up 64% of global total in 2007.
The pensions balance for FTSE100 companies in the UK was estimated at an aggregate deficit of £40bn ($56.4bn) in mid-2008. Rising costs mean that UK private sector defined benefit schemes are increasingly being replaced by defined contribution schemes.
However, the report said contributions to DC schemes average 9% of salary - less than half the 20% of salary in remaining DB schemes. It also found more people of pensionable age were supplementing their pension by staying in work. Employment amongst people of pension age has risen by 425,000 from 900,000 at end-2002 to 1.32m at end-September 2008.
Report author and director of economics Duncan McKenzie said: "There is unlikely to be significant improvement in credit markets in the short term. It is possible that an eventual narrowing of spreads will be accompanied by recovering equity markets which would contribute to some equilibrium in the aggregate position of pension funds.
"If however a narrowing of spreads occurs ahead of any significant recovery in equity markets then the financial position of pension funds will deteriorate and further capital injections may be required."
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