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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension funds suffer biggest losses since financial crash

The average UK pension fund experienced its biggest loss since the financial crash last year, with less than one in ten generating positive investment returns.

Falling pension fund returns ©Shutterstock
Falling pension fund returns ©Shutterstock

Published today in a report from Moneyfacts, the findings show that average annual pension fund returns fell by 6.2% in 2018 following a 7.3% decline in the final quarter.

Just 9% of funds recorded positive investment returns for the year, with the report citing widespread economic and political uncertainty as one of the main reasons.

Moneyfacts’ head of pensions, Richard Eagling, said: “Last year’s market downturn will increase the focus on investment decisions being made by pension savers and drawdown investors.

“The extent of the losses, combined with the return of greater volatility, raises the question as to whether savers and drawdown investors will reduce their exposure to stock markets.”

How pension funds’ investments have performed since the 2008 financial crash is shown below:

Source: Moneyfacts Personal Pension Trends Treasury Report
Source: Moneyfacts Personal Pension Trends Treasury Report

The data shows that UK Smaller Companies, Europe including UK Equities, and Europe excluding Equities, recorded average returns of -13.9%, -13.6% and -12.1% respectively last year.

These were the worst performing ABI pension fund sectors, while Global Emerging Markets, Commodity/Energy, Japan and UK All Companies also suffered double-digit losses.

Moneyfacts highlighted how funds had enjoyed positive returns since pension freedoms were introduced, until last year, with the reverse in fortunes possibly impacting many people’s savings.

“The other threat posed by falling pension fund returns is that it could undermine efforts to encourage greater personal pension contributions,” Eagling added. 

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