GLOBAL - Pension funds across the world felt the detrimental impact of the euro-zone sovereign debt crisis last year, with turbulent stock markets leading to losses in all major pension markets examined by a new Towers Watson survey.

In its Global Pension Finance Watch, the consultancy said that, despite a stock market recovery in the fourth quarter of the year, uncertainty over the previous three quarters led to overall negative growth of -2.1% among euro-zone schemes, with Japan’s pension funds returning -8.1% over the year and Swiss schemes falling by 0.9%.

Pension funds monitored by Towers Watson in the UK were able to boast returns of 8.6% in the three months to December, with overall returns reaching 7.6% in 2011.

According to a more detailed breakdown of returns, euro-zone domestic equities fell by 12.9% over the year, with international equity returns coming in at 0%, aided by 12.1% growth during the fourth quarter.

However, despite the positive returns for countries such as the UK, as well as the US, Brazil and Canada, declining bond yields led to double-digit increases in liabilities in three of the seven regions examined.

Gilt yields - depressed through the Bank of England’s quantitative easing stimulus package - led to a 17.6% increase in liabilities, with Swiss liabilities increasing by almost 8%.

Pension funds within the euro-zone were able to offset weak returns by only seeing liabilities rise by 3% on average, the lowest calculated rise.

Commenting on the findings, Christine Farmer, senior international consultant, noted that the past few years had seen many defined benefit schemes “doubly hit by unfavourable asset performance” and falling interest rates.

“And 2011 was no exception,” she added. “We expect these economic trends to cause employers to continue to evaluate their overall retirement benefit plan risk-management strategies.”

The same survey examining the German pension market found funding levels dropping “considerably” among a model occupational pension scheme listed on the DAX.