The turndown of equity markets in June cost the top 200 largest privately-sponsored UK pension funds a total of £36bn. That leaves three quarters of the funds in deficit by £30bn. This shocking vulnerability makes one wonder what will happen to pensioners who have the misfortune to start drawing their pensions during a prolonged economic downturn.
At one time it would have been argued that pensions must guarantee a defined standard of living that is independent of equity markets. This social contract made sense to the generation that suffered the Great Depression a World War and two decades of recovery--less so to the current generation of politicians and fund managers.
Shares gloom leaves pension funds with £30bn deficit
Sunday, July 6, 2008
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