The UK's combined defined contribution (DC) pension pot dropped by £18bn over October to £489bn, according to estimates from Aon Consulting.

The firm reported that the fall - the biggest since February - should not be of concern, as DC pensions savings remains on an upward trajectory. Richard Strachan, a senior consultant at Aon, said that DC members had to continue to take an active interest in retirement savings to check whether "they are invested in the right funds for them, and to have some very clear goals and a strategy to achieve them."

Separate research conducted by the company however, shows that British workers are doing the complete opposite and are increasingly turning towards their DC pension's default fund. The 2009 Aon Benefits and Trends Survey showed that, across 13 sectors and 650 companies, the majority of employers are seeing this trend in more than 80 per cent of their employees.

"In turbulent economic times, it's understandable that members are seeing the default fund as a safe haven. However, the security of the default fund is down to those managing the scheme. To ensure that members are getting the cautious investment option they think they are, scheme investment, and the performance of default funds in particular, should be a priority for those running DC pensions," Strachan added.

Meanwhile, research by AlphaValue shows that UK banks are underestimating the defined benefit (DB) pension deficits of Europe's major listed companies, with 430 misjudged by €300bn in their last full year report. Some of the largest gaps were recorded at UK banks.
In value terms, the most underestimated fund obligations came from Lloyds, RBS, British Airways, Siemens, Barclays, RD/Shell, HSBC, GSK, BT Group, ING and EDF.

"More than one-third of 2008 pensions obligations - some €1,100bn - are recorded at UK companies, as this is where the largest companies operate with the largest defined benefit commitments," explained Pierre-Yves Gauthier, director at AlphaValue. "The bulk of the non-accounted-for pension deficit is also with UK corporates, especially the banks, as they use rather high discount rates compared with non-UK peers."

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