Pensions 'less than half the minimum standard of living'
Pension pots have continued to shrink alarmingly in the past month, leaving 65-year-olds with half the amount they need for an adequate standard of living in retirement, analysts said yesterday.
The latest falls in pension incomes will leave the average 65-year-old with just £7,666 a year, a fall of £259 over the month, the employee benefits company Aon Consultancy calculated. For the first time, that is half the £14,400 income that the Joseph Rowntree Foundation recommends for an adequate standard of living for a pensioner.
Aon's analysis showed that the projected annual pension income for a 30-year-old dropped by £518 in the past four weeks, while that of a 60-year-old fell by £358. Projected annual income in retirement for someone aged 30 now stands at £19,344, while for someone aged 60 it has fallen to £10,466.
Aon's projections predict the retirement income of individuals of various ages who contribute 10 per cent of a £25,000 salary to a defined contribution pension. Richard Strachan, one of the firm's senior consultant, said: "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."
He warned pension savers they faced a retirement in penury if they do not act to boost their retirement income. "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," Mr Strachan added.
Meanwhile, the research company Defaqto warned that many people were approaching retirement with a number of different pension pots that might not be well invested.
"Instead of holding a number of smaller pension pots with different providers, consolidation into one pension plan may be a wise move," said David Abbis, the author of Defaqto's Guide to Self-Invested Personal Pensions. "Planning can then be made towards retirement, with sensible investing and monitoring hopefully resulting in better performance."