Pension fund returns hit five-year low

By Jennifer Hill

LONDON (Reuters) - Returns on pension savings hit a five-year low last year, research shows.

The average pension fund posted growth of just 5.41 percent during 2007 -- the poorest performance since 2002 when the bear market led to average losses of 15.2 percent, according to Investment Life & Pensions Moneyfacts.

The latest figure is down on the 9.17 percent rise notched up in 2006 and a far cry from growth of 19.9 percent witnessed during 2005.

In some cases, pension funds posted losses on contributions made during 2007.

Property was the worst-performing pension fund sector during the year, recording an average loss of 13.6 percent during 2007 compared to profits of 19.2 percent the previous year.

Pension savers who invested in Japan, the UK smaller companies and UK equity income sectors also suffered losses -- of 11.4 percent, 5.6 percent and 0.3 percent respectively.

For them, holding the money in cash would have borne more fruit.

The average savings notice account gave a gross return of 3.8 percent during the year, based on a sum of 1,000 pounds, and almost half -- 13 out of 27 -- of the Association of British Insurers' pension sectors delivered lower returns than cash.