A 60-year old person retiring now faces annual pension income that will be £3,000 less than it was 2 years ago, according to pensions consultancy Aon Corporation.
Aon bases its calculations on its proprietary Aon DC Pension Index, which tracks the value of pension income from private pensions for an individual contributing 10% of a £25,000 salary into a defined contribution pension scheme. Aon makes projections for pension income for various individuals including a 30-year-old, a 60 year old and a 65 year old as samples from the Pension Index.
Aon’s latest snapshot for July 16 2010 shows that a 60 year old transforming £150,000 of pension savings into a pension income by purchasing a pensions annuity would have received £13,932 in 2008, but would receive just £10,824 today, a fall of £3,108 over 2 years.
For a 65 year old, the projected pension income from pensions savings of £150,000 would have fared even less well during the ‘red valley of tears’ in the latter half of the past decade. His or her income from their pensions annuity would have fallen from £10,327 in 2008 to just £7,925 today.
Aon’s latest figures show the importance of pension planning and taking good pensions advice, before choosing when to retire.
Aon also pointed out that Government hopes to achieve savings in the cost of the basic state pension, by raising the state pension age by 1 year, may be miscalculated. The fact that life expectancy is also expected to increase by 1 year between 2010 and 2016 will mean that those in retirement will not be taking their pension income from the basic state pension for 1 year less, as the Government expects, but for the same number of years as before.
