Over the last two years, the projected annual retirement income for a 60 year old has fallen by more than £3,000, while 65 year olds can expect to live on barely half the amount suggested as an acceptable living standard.
According to the Aon DC pension index the proposed one-year increase in retirement age would still leave retirees receiving their state pension for the same number of years as they do currently.
Based on data collected on 30th June 2010 compared to 30th June 2009 and 30th June 2008, the projected annual retirement income of typical defined contribution (DC) pension investors at different ages over the two-year period is as follows:
- 30 year old: £19,863 – down from £20,658 in 2009 and £23,060 in 2008 (£3,197 decrease overall)
- 60 year old: £10,824 – down from £10,373 in 2009 and £13,932 in 2008 (£3,108 decrease overall)
- 65 year old: £7,925 – down from £7,512 in 2009 and £10,327 in 2008 (£2,402 decrease overall)
Despite improvements in stock market performance since the credit crisis, the value of DC pensions is still very volatile and UK pension pots have lost significant value since the recession struck. Aon’s data demonstrates the shortfall that exists, particularly among older generations, between their projected retirement income and the estimated £14,400 minimum income a single person needs for an acceptable standard of living.
Richard Strachan, senior consultant at Aon Consulting, said: “During the credit crisis, we have seen dramatic volatility in the stock market. Recently the market has showed distinct signs of recovery; however, this is not yet reflected in annual retirement income which remains considerably lower compared to pre-recession values. Looking at the two-year period from June 2008-2010, it really is quite staggering to see how significant the impact has been on the income a retiree can expect to receive.”
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