by Dr. Ros Altmann

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2009 will probably be a pretty awful year for pensions. After the dramatic worsening of final salary pension deficits, employers will continue to close their schemes and some may even find pension deficit funding costs tip them over the edge into bankruptcy.

Pension contributions in 2009 are likely to fall. Firstly, confidence has been shaken by the dreadful performance of many money purchase schemes and successive scandals. Secondly, after rescuing Icelandic banks' retail depositors 100%, while pensions are at best 90% safe, many people may conclude they are better off not bothering with pensions. Thirdly, as recession bites, cutting pension contributions is a less painful way to reduce spending, and as unemployment rises there will naturally be fewer people contributing to company pensions anyway.

Annuity rates may worsen during 2009 as interest rates and inflation stay low and the trend to enhanced rates and more flexible annuitisation options should continue.