Pensions - Articles - Pension fund performance deteriorates in first quarter 2018

 The report shows how after a run of positive gains in the previous nine quarters the average pension fund registered a loss for the first time since Q3 2015, falling by 3.8%.

 Of the 36 ABI pension fund sectors surveyed, only two (UK Direct Property and Money Market) avoided a fall. The heaviest losses during the quarter were suffered by Commodity/Energy (-10.4%), Global Property (-6.8%) and UK All?Companies (-6.1%). The extent of the more difficult conditions for pension funds in Q1 2018 can be seen by the fact that only 7% of all the pension funds surveyed produced growth during this period.

 Pension fund performance is likely to be more prominent in the minds of those saving into a workplace pension now that the Government’s first phase of its increase to minimum contribution rates for auto-enrolment is underway. Mandatory contribution rates rose to a combined 5% from 6 April 2018, of which at least 3% must come from the employee. The minimum contribution level will rise further to 8% in April 2019, of which 5% must come from the employee.

 Richard Eagling, Head of Pensions at Moneyfacts, said: “A major concern is how employees will react to seeing their minimum pension contributions triple. With signs of greater volatility returning to the investment markets it will be interesting to see if this dampens enthusiasm for saving into a personal pension or workplace pension, particularly given the higher minimum contribution rates that employees are now facing. It could also encourage individuals to reconsider their retirement income decisions at the decumulation stage by favouring the secure income of an annuity over the greater flexibility and risks inherent in drawdown.”