Pension fund growth strong but slowing

05 January 2007
UK pension funds grew at their slowest rate for four years in 2006, Mellon Analytical Solutions (MAS) claims.

The average gain for pension funds was 8.8 per cent for the year – less than half the 19 per cent return of 2005, Mellon spokeswoman Sally Ling told Bloomberg.

In 2004, average returns were ten per cent and in 2003, 16 per cent.

Nevertheless, the fourth consecutive year of positive performance takes the average fund's four-year return to 13.4 per cent.

Positive returns are vital because they boost pension funds' assets, ensuring they have adequate means to pay retirees.

MAS publications and statistics manager Daniel Hall commented: "Based on weighted average performance, a fund with a value of £100 million at the end of 1999 … would have been worth £129.9 million [by the end of 2006], a 29.9 per cent gain on the 1999 value."

"However … we must remember that for many funds the pace of increase in liabilities is still a major concern," he cautioned.

It recently emerged the FTSE 100 firms halved their pension deficits in 2006, scaling down the "black hole" from £75 billion to £38 billion, according to accountancy firm Deloitte.

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