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Pension pots continue to dwindle

Pension pots continue to dwindle

Category: Pensions

Updated: 16/08/2010
First Published: 16/08/2010

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 It is now over 6 months old so the content may be out of date.

Despite the predictions of growth for the UK economy, the value of the nation's pension pots has continued to fall over the last month.

Pension pots have shrunk further over the past four weeks, with a 30 year old's and 60 year old's annual pension income falling by an average of £518 and £358 respectively, according to Aon Consulting.

These latest falls mean that a 30 year old contributing 10% of a 25,000 salary to a defined contribution scheme with an existing fund of £15,000 would be on course to building up a retirement pot of £19,344 a year.

However, with many people paying in substantially less than 10% of their salary, or none at all, a far smaller pension pot will be on the cards for others.

Figures also show that 60 year olds have seen their average annual pension pot fall from £10,824 to £10,466 over the last month.

The future conditions for 65 year olds is even more worrying, with the predicted retirement income now below 50% of the adequate standard of living, with an annual income averaging £7,666.

On such an income, even those who plan to retire to cheaper countries would struggle to achieve a decent standard of living.

"Though we have seen some improvement to economic circumstances in the past six months, pension pots are in only marginally better shape than this time last year and due to the volatility in stock market activity, pension pots shrank once again during the last month," said Richard Strachan, senior consultant at Aon Consulting.

"As some areas of the economy forecast growth and others continue to struggle, making the right investment choices is key for any pension investor, whether individual or institutional. Employers should ensure their pension schemes – and their default funds, in particular – are invested wisely to maximise the green shoots of recovery.

"Individual pension investors should keep a watchful eye on their pension pots to ensure their retirement plans are on track, and make suitable provision for their future."

To give yourself the best chance of building up a decent pension pot, it is advisable to shop around for an annuity.

Why not start your annuity research today? Our annuity Best Buy tables illustrate how the offerings from annuity providers such as MGM Advantage and Saga compare.

We've also recently teamed up with Premier Retirement Services to give you access to their online annuity planner service.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.