Pension funds lost £18bn in value in October alone

The total value of defined contribution pension funds fell by £18bn last month, figures published by a leading pension consultant reveal today. It is the biggest single monthly fall ever registered.

Aon Consulting said that all defined contributions in the UK combined were worth £489bn at the end of last month, compared to £507bn at the end of September. The slide in valuations reflects a bad month for stock markets around the world as they fell back last month after a period of strong gains.

Defined contribution schemes are not guaranteed by employers, so members' pensions depend on the investment performance of their funds and what income these funds will buy when they come to retire. Last month's fall is disappointing for pension savers, though it followed several months of strong gains, with the total value of funds actually reaching a 16-month high of £520bn early in October.

Aon's statistics also reveal that stock- market volatility is playing havoc with the pensions of those who are currently coming up to retirement. A 65-year-old man who retired at the end of month could have secured an annual pension of £8,593, based on certain assumptions about his savings made by Aon. Had the same man retired six months earlier, he would have got just £7,133 a year, based on the same assumptions.

Richard Strachan, a senior consultant at Aon Consulting, warned that investors who did not monitor their pension savings carefully could be caught out, even though the market's recovery seemed to be boosting funds.

He said: "There is still significant volatility. It is vital for workers to take an active interest in their retirement savings, evaluating whether they are invested in the right funds for them, and to have some very clear goals and a strategy to achieve them."