£127bn wiped from pension funds according to new report

Around £127bn has been lost from UK pension funds as a result of the recent stock market crash, according to a new report.

The value of employees' defined contribution pensions, of which there are thought to be around four million such schemes in the UK, has dropped by nearly a third from £552bn to £395bn, according to research by consultancy firm Aon.

The company claims that workers with such schemes are encouraged to take too many risks on the performance of stock markets with their pensions which, unlike final salary schemes, do not guarantee a pension based on end-of-career earnings and length of service.

Instead, defined contribution schemes invest any contributions into shares and bonds, but the size of the final pension is not guaranteed as it depends on market performance.

The research by Aon claimed that the value of defined contribution assets dropped by 28% to £395bn between October 2007 and October 2008.

During the same period, it is estimated that £6.7bn of contributions were paid into these schemes by employers and their staff.

"It may appear a double blow to workers that not only are they facing more of a struggle to make ends meet, but the economic turmoil is also seemingly eating into the money they have been putting aside for retirement," said Helen Dowsey, of Aon Consulting.

"However, most workers will have the fortune of time on their side as their retirement will be many years away, enough time to weather the current storm."

She added anyone approaching retirement might consider delaying, and she encouraged people nearing retirement to seek professional help when considering how to move around their investments.