UK - Gains made by FTSE 100 pension funds over 2007 were wiped out yesterday in the greatest equities crash since 9/11 2001, according to some UK consultants.
Marcus Hurd, senior consultant and actuary, Aon, commented: "Based on market movements over the past week, pension schemes have lost over £40bn in a week, which is equivalent to wiping out all the gains made in 2007."
Hurd warned the worst might not be over as there could be more downwards movement when US markets opened later in the day, adding that stable corporate bond yields had not helped reduce scheme liabilities.
He added: "Usually the yields offset the impact of equity market falls by increasing during an equity market fall. This has not as yet happened."
Given the massive drop in aggregate surplus from £10bn at the end of December to a £15bn deficit three weeks later, PriceWaterhouseCoopers urged company pension funds to be cautious when making investment decisions based on valuations taken on a particular day.
Marc Hommel, pensions partner, PwC, said: "It is far better is to work towards agreement of what kind of risks the sponsoring employer and trustees are prepared to take and then agree on the financing and asset strategies."
However, Pensions Corporation dismissed the market's fascination with valuation of funds over liabilities and, while agreeing with the market shape, warned the calculations might not be accurate.
A statement from the pension fund buyout company said: "While we can see what's in the pot at a given point, the fundamental problem that still faces both UK public companies and the public sector is that, for most schemes, the calculation of liabilities is made using out of date longevity assumptions."
Pensions Corporation said it envisaged 2008 could potentially be more volatile which could mean a reversal of fortune even on an FRS17 basis.
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