Returns plummet for savers as credit crunch takes its toll

Pension fund returns were at their lowest for five years in 2007, the financial analyst Moneyfacts has revealed. Only savers who hold more aggressive funds investing in the Far East and emerging markets started 2008 relatively unscathed.

The research shows that during 2007 the average pension fund posted growth of 5.41 per cent, compared with 9.17 per cent in 2006 and 19.9 per cent in 2005. In some cases, funds actually posted a loss on the contributions made in 2007. Pension savers who opted for a property fund endured an average fall of 13.6 per cent, and Japanese funds plunged by 11.4 per cent over the year.

Almost half of the 27 pension sectors analysed by the Association of British Insurers delivered lower returns than did cash investments.

The average UK All Companies pension fund has grown just 2 per cent, while returns from the average UK Smaller Companies fund fell by 5.6 per cent in 2007.

While the UK has been among the countries hit hardest by the credit crunch and the fallout in the markets, Asia has proved a great survivor, with China in particular enjoying a phenomenal 2007. The Far East Excluding Japan sector was the biggest success story of the past 12 months, with the average pension fund posting a return of 36 per cent.