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Derin Clark

Derin Clark

Online Reporter
Published: 04/08/2020

Workers saving into a pension will be pleased to see that during April to June (Q2) 2020, pension fund performance improved significantly compared to the first three months of 2020.
Data from the latest Moneyfacts UK Personal Pension Trends Treasury Report shows that in Q2 2020, the average pension fund returned to 13.3%, its best quarterly performance since July to September (Q3) 2009. This compares with January to March (Q1) 2020, when pension funds suffered their worst quarterly performance on record, with the average pension fund losing 15.2%.

The strong performance during Q2 2020 means that pension funds have now recovered much of the ground they lost during Q1 2020. Saying this, despite starting to make a recovery, the overall values remain 4.4% lower than at the start of the year.

At the start of the year when pension funds saw record falls, pension savers were urged to not make quick decisions about their retirement savings and instead consider the long-term investment, as Richard Eagling, head of pensions at Moneyfacts, explained: “After the sharp stock market falls in March 2020, regulators such as the Financial Conduct Authority and The Pensions Regulator were quick to urge pension savers to keep calm and not rush into any decisions about their pensions. The fear was that knee-jerk reactions such as changing investment strategies or making withdrawals at an unfavourable time could see individuals compound their losses and damage their long-term retirement prospects. Indeed, as the latest pension fund returns clearly show, those individuals that took such action may have missed out on rising pension values as the market recovered.”

Annuity rates remain subdued

While pension savers will have seen a strong performance during Q2 2020, those looking for a secure retirement income through an annuity will have been disappointed to see that the market remained subdued. The average annual standard annuity income for an individual aged 65 (based on a single life £10,000 level without guarantee annuity) increased by 0.7% in Q2 2020, meaning that despite the increase, the average annuity income is still 5.3% lower than at the start of the year.

While the annuity rates have remained subdued, the slight increase together with the strong pension fund growth during Q2 will have boosted the retirement incomes available to those saving into a personal pension and looking for an annuity. For example, an individual who had saved £100 gross per month into a personal pension for 20 years would have built up a final pension fund of £46,318. Using this to take an income through an annuity at age 65 means that they will now receive just £1,875 per annum, an increase of 12.7% on Q1 2020 when the average retirement income was at a historic low. Despite this increase, the average retirement income for those looking to secure an income from a pension pot through an annuity is still 11.9% lower than a year ago.

Ideally, those looking to retire should speak to an independent financial adviser who will be able to discuss the best options available for their personal circumstances, along with additional options that will enable them to boost their retirement income.


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