Although the UK’s defined contribution (DC) pension funds have seen a £30 billion improvement to £485bn in the last month, but workers still face a ticking time-bomb according to Aon Consulting.
Aon’s DC Pension Tracker for August shows expected retirement income for those now aged 60 to be just £12,021 per annum, or £231 per week. This is 52% less than the 2008 average annual UK wage of £24,908 or £479 per week according to the Office of National Statistics.
At the end of August, projected pension incomes for typical workers with average pension contributions are as follows:
- A 65 year old worker retiring at the end of August with only DC pension savings would, on average, receive £8,816 per annum, only a third (35%) of the 2008 annual wage. This compares to a year ago when a retiree with only DC savings could expect to retire on £10,105.
- A 30 year old worker can expect to retire on £21,760 per annum, down slightly from a year ago when projected DC retirement savings were £22,617.
Aon’s DC Pension Tracker measures the total asset value of UK workers’ DC pension accounts. It also tracks the income in retirement of individuals at different ages who contribute 10% of their £25,000 salary to their retirement savings and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above.
Helen Dowsey, head of DC at Aon Consulting, commented: “While it seems the UK economy is experiencing some green shoots, UK workers with DC pensions show only a slightly improved situation from a few months ago. Although a well-managed DC pension undoubtedly has the potential to offer a good level of retirement income, the onus is on the member to be proactive in order to build and safeguard their investments.”