There are a very large number of UK employees who have been contributing to a private pension scheme partially funded by their employers, which they are assuming will provide them with either a very tasty lump sum, or a monthly stipend that will considerably boost their state pension. However people who are due to retire within the next five years are in for a not too pleasant surprise when they discover that the value of their pension has been eroded due to the economic ravages that the equities market has experienced in the last 24 months.

Some worrying information has emerged that the UK’s largest private sector retirement fund ,the BT Group Pension Scheme was reported to have only sufficient funds on hand to pay about 57 per cent of their pension obligations in the event, albeit unlikely, that the telecommunications company were to become insolvent. A spokesman for the company did hasten to announce that they are now taking every step possible to return this figure to a healthier level, as well as considerably cutting back on its future investments in equities for the future.

Huge companies, such as BT, who are faced with the awesome responsibility of handling huge pension funds consistently, took refuge in the FTSE as a hedge against inflation. The shift in investment strategy that they will now be making is significant and they will now have to find ways to make safer short term investments to keep their pensions funds at a higher level.

A spokesman for the British Telecom Pension Scheme (BTPS) announced their target is cut to 33 per cent of the fund’s equities portfolio and instead acquire assets which are low yielding and safer such as bonds that will move in line with liabilities.

The statement of investment principles applying to company managed pension funds explained the investment shift, noting: “The trustee acknowledges that, in particular, the level of investment in risky assets might, over the short to medium-term, influence the volatility of the funding level of the scheme, and hence may influence the volatility of the employer balancing contribution rate.”

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Tags: Company Pension, Minister for Pensions, Pension Scheme, Pensions, Private Pension