Employees' pensions have been slashed by over a third due to the credit crunch, according to Aon's new defined contribution (DC) Pension Tracker.

Since September 2007, DC pension assets have lost 35 per cent of their value, the equivalent of £140bn, and the Aon DC Pension Tracker shows that the value now stands at £410bn. Aon has attributed this fall to the lack of performance in equity markets, although this effect depends largely on the age of the employee.

For example, a 30 year old employee has seen their projected pension fall by 8.5 per cent since September 2007, whereas a 60 year old paying total contributions of ten per cent on a £25,000 salary has seen a 36 per cent drop.

Those aged 18 to 40 years old, for whom retirement is at the moment a date in the far future, there is only a zero to 20 per cent fall in their pension account. In contrast, 55 to 65 year olds have seen a 30 to 36 per cent drop.

"Over the last year, DC pension scheme savers have been hit hard by the falls in equity markets, and people need to take an active role in reviewing their pensions," said Helen Dowsey, principal at Aon Consulting.

"There is a widely held misperception, perhaps borne out of discussions around final salary pension schemes, that pension values are guaranteed. In reality, the level of contributions paid in, the real investment return received and the annuity rates prevalent at retirement, all affect DC pension accounts."

She added: "We have seen some exceptional falls since the onset of the credit crunch, and we urge both employers and employees to maintain the long-term view that pensions are the best way to save for retirement."

- Pensions Age February 2009

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