FTAdviser.com

Advertising

People could end up delaying the age they retire at after the recent market turmoil has battered pension funds and annuity rates, pensions expert Tom McPhail has claimed

Referring to recent events, the head of pensions research for Bristol-based Hargreaves Lansdown, said it would mean pension savings are worth less with job losses feeding through into reduced pension funding at a time when assets are at their cheapest.

He said: "Pension investors can afford to take a longer-term view. This means making regular ongoing investments into the markets and focusing on the medium to long-term returns rather than on the short-term losses.

"For many people who are 10 or more years from retirement, this recent market turmoil will not damage their retirement prospects."

Even before the recent market turbulence and the merger of HBoS and Lloyds TSB, the number of pension schemes in deficit continued to increase.

Figures from the Pension Protection Fund showed that in August the level of defined benefit pension schemes in deficit at the end of the month was estimated to have worsened to £91.6bn from £80.1bn in July.

Marc Hommel, pensions partner for PricewaterhouseCoopers, said pension problems continue to bite.

He said: "UK pension schemes are facing the triple pressure of declining equity values, lower income from dividends and increasingly cash-strapped employers. It seems that no matter how much additional funding companies have agreed, the pensions problem keeps coming back to bite."

Robert Graves, product development manager for Sipp specialist Rowanmoor Pensions, said its members were moving into cash, actively investing in opportunities that have developed or riding it out.

He said: "It depends when you want to realise some of the investments - if you are long way off retirement, market turbulence might be seen as a good thing because you have the opportunity to invest and you have a long time for them to come back again.

"If you are a lot closer to retirement, they may see their funds suffer a hit. They may have to revise their plans to when they are going to draw benefits."

Keith Barton chairman of the Association of Consulting Actuaries, said in the short term markets have fallen and therefore the value of pensions have fallen.

He said: "These things can bounce back and it quite hard to see what the long term effects maybe, the best thing would be not to take knee jerk reaction."