THE CONSISTENT decline in achievable pension income supports the government’s moves to increase retirement age, says Aon. Yet the increases in retirement age proposed so far will still leave people receiving pensions for same number of years.
The firm says the projected annual retirement income for a 60 year old has decreased by over £3000, while 65 year olds can expect to live on barely half the amount suggested as an acceptable living standard. With life expectancy at age 65 expected to increase by almost exactly one year between 2010 and 2016, a proposed one-year increase in retirement age would still leave retirees receiving their state pension for the same number of years as they do currently.
The impact of the economic downturn and subsequent hit on projected annual retirement income may mean that the UK population will have to work for longer simply to afford to retire at an acceptable standard of living, says the firm. The Aon DC Index follows the projected retirement income of individuals Based on data collected on 30th June 2010 compared to 30th June 2009 and 30th June 2008, the index’s projected annual retirement income of typical DC pension investors at different ages over the two year period for a 30 year old is £19,863 – down from £20,658 in 2009 and £23,060 in 2008, a £3197 decrease overall. For a 60 year old, projected income is £10,824 – down from £10,373 in 2009 and £13,932 in 2008.
Richard Strachan, senior consultant at Aon Consulting says: “During the credit crisis, we have seen dramatic volatility in the stock market. Recently the market has showed distinct signs of recovery; however, this is not yet reflected in annual retirement income which remains considerably lower compared to pre-recession values.”