Pension pots drop 60 per cent - Pensions - News - Moneyfacts


Pension pots drop 60 per cent

Pension pots drop 60 per cent

Category: Pensions

Updated: 05/02/2010
First Published: 05/02/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Personal pension savers are facing an uphill battle in their quest to fund a comfortable retirement, according to the latest survey by Investment Life & Pensions Moneyfacts.

Its quarterly insight into personal pension payouts revealed that the average personal pension pot has dropped by a staggering 60 per cent over the last decade, despite pension funds enjoying their best annual growth in last year since 1999.

According to the survey, someone who had paid £100 per month into a balanced managed fund for the preceding 20 years would have built up a pension fund of £40,749 if they retired now, compared with £103,914 if they had retired a decade ago.

Richard Eagling, Editor of Investment Life & Pensions Moneyfacts said: "Given that the last decade presided over a dotcom crash and a credit crisis, it is hardly surprising that pension funds have performed so poorly.

"However, unless individuals increase their contributions and take greater interest in the returns generated, the next decade could prove just as disappointing."

The situation has been further compounded by the continuing fall in annuity rates. A combination of falling gilt yields and improving mortality rates have forced the average 65 year old male level without guarantee annuity rate down 28 per cent over the last decade.

As a result, a male retiring at 65 today and purchasing an annuity with his pension pot would be more than 70 per cent worse off than a counterpart who had retired ten years ago.

Mr Eagling added: "Although these figures do little to inspire confidence, they at least serve as a powerful reminder of the investment risks inherent in saving via a defined contribution pension."

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