Company Pension Funds 'Losing Money'

Many workplace retirement savings plans have fallen into deficit over the last month, pension consultants Watson Wyatt said today.

The firm's study, which analysed the current financial health of pension funds in FTSE 100 firms, shows that an overall surplus of £23 billion turned into a deficit of £8 billion in June as the stock markets continued to prove volatile. Rising inflation expectations in the futures markets, which effectively forecast further erosion in the value of savings, also put downwards pressure on the funds.

This means that workers for many of the UK's largest companies faced a loss in the value of their savings across the month. This could be explained by the fact that the FTSE All-Share Index, which is heavily invested in by pension funds, dropped by ten per cent over this period.

Rashpal Bhabra, head of corporate consulting at Watson Wyatt, commented: "Companies with defined benefit pensions have offered their staff protection against prices rising in future but have limited protection against this themselves."

She added: "Some [pension fund finance directors] who could have hoped to report a pension surplus a few weeks ago will have to report a deficit instead."