The Aon UK DC Pension Tracker rose over the quarter from 56.8 to 60.0, with older members benefiting most from strong investment returns during the period.
The rise was driven by strong investment returns over the period which primarily benefited older savers with larger existing funds.
The data shows that the youngest saver’s expected income remained unchanged due to a balance between reduced future investment return assumptions and positive benchmark returns, alongside increased expected asset returns post-retirement.
It also shows that the 40-year-old’s expected retirement income rose by £1,125 annually (3.2 per cent) due to positive investment returns, despite a slight drop in pre-retirement returns. The 50-year-old saw the largest increase, with an annual boost of £2,050 (6.0 per cent) from strong investment returns and better asset return expectations.
Meanwhile, the oldest saver’s expected income increased by £475 annually (2.5 per cent) due to strong asset returns and better future expectations. Despite this, their retirement income is projected to be about 140 per cent of the ‘minimum’ Retirement Living Standard, excluding any defined benefit pensions.
Recent increases in Retirement Living Standards have made it harder for all savers to achieve a ‘comfortable’ retirement. The 40-year-old and 50-year-old savers are expected to have incomes between moderate and comfortable, while the youngest will be slightly above moderate.
Aon partner and head of UK retirement policy Matthew Arends says: “It is, of course, up to governments to decide on national spending and welfare policy. What our analysis shows, however, is that, if the OECD’s proposal has been adopted since the single tier state pension began in 2016, outcomes for members would have been affected.
“But the effect is less than you might expect – our sample members’ retirement outcomes are projected to be about £375 a year lower after tax, or approximately £7.20 a week. Having said that, the state pension is of most significance to the lower paid for whom this size of shortfall could make a material difference to their lifestyle.”