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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension schemes experience record volatility amid turmoil

The five trading days to 5 March 2009 were the most volatile on record for UK final salary pension schemes, according to Aon Consulting. In a week when world financial markets suffered huge volatility, the FTSE dipped to its lowest level in six years, AA corporate bond yields were erratic, and Aon estimated the knock-on effect for final salary pension schemes as measured by company accounts.

Combined deficits for the UK’s 200 largest defined benefit schemes over the five days, as calculated by Aon, were:
Thurs 26 February £38bn
Fri 27 February £41bn
Mon 2 March £68bn
Tues 3 March £73bn
Weds 4 March £56bn

Commenting on the falls, Marcus Hurd of Aon said: “The past week has been the most volatile for final salary pension schemes since accounting standards were changed in June 2001. Monday posted the biggest single day loss on record, a huge £27bn, which dwarfed the previous biggest loss of £16bn on 15 October 2008. During the past five days, the deficit peaked at a massive £73bn, the highest level since February 2006. This was prompted by the large losses in the equity markets and the 0.25% drop in corporate bond yields.”