It has been a difficult year for pension funds. Interest rates are at an all time low and the weakness in the stock market has led to a huge reduction in returns. The introduction of Quantitative Easing last month will also have a knock on effect of reducing annuity rates. This combined with spiralling transaction costs imposed by the Banks and the risk of further transaction costs proposed by the EU lead to a very miserable outlook for pension funds. We can certainly expect a cut in pension income under the current climate.
Pension funds cannot afford to place too much reliance on the stock market as this is showing little sign of recovering soon. Pension funds are now exploring a variety of new schemes. Government proposals for Bonds to be issued by the private sector hold merit as this will enable Pension funds to move away from the current methods which are clearly not working effectively. Perhaps we will see a new breed of Pension funds emerge in the future.