Millions of workers have been left fearing for their pensions as the stock-market crash has wiped billions off their funds.

The slide has opened up a £97 billion black hole in the country’s 7,800 British final-salary schemes, compared with a surplus of £53 billion in May, the Pension Protection Fund said last week.

The average balanced managed personal pension fund, meanwhile, has dropped 22.5% in the past year, according to data provider Trustnet. In addition, a four-week consultation into the funding of private sector pensions, launched last week by the government, could relax requirements on companies’ pension promises.

So, how are pension and investment professionals navigating the current turmoil?

JOANNE SEGARS

The chief executive of the National Association of Pension Funds is among the lucky few. She has been a member of its final-salary scheme since she joined in April 2005. Under the scheme, one of the few still open to new members, she is building up her pension at a rate of 1/60th of salary a year.

At 43, Segars has more than two decades to go to reach her scheme’s retirement age of 65. “I’ve got a good number of years to go until I retire, and being in a final-salary scheme means I’ve not needed to take action to address current issues,” she said.

Final-salary schemes are the most generous of pension schemes: here, employers, not employees, bear the investment risk. However, that does not mean Segars can rest on her laurels. A string of companies have closed final-salary schemes to new members or pared back benefits of late.

Earlier this month, BT proposed radical changes to its final-salary scheme — the largest in the private sector. It wants to cut the traditional link with final salaries, raise the retirement age to 65, and cut pension fund accrual to 1/80th of salary every year, rather than the better rate of 1/60th.

If your scheme raised its retirement age to 65, but you wanted to stop work at 60, it would cost an extra £153 a month to retire on two-thirds of a final salary of £30,000, said adviser Hargreaves Lansdown.

JOHN LAWSON

The head of pensions at Standard Life has a defined-benefit scheme — but one that is based on average earnings over a member’s career, rather than their final salary. The terms of the scheme were changed at the start of this year, showing that even members of final-salary schemes should not assume their benefits are “safe”.

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