LONDON, 16th August 2010 Pension pots have shrunk further in the past four weeks, with a 30 year old’s and 60 year old’s annual pension income decreasing by £518 and £358 respectively and 65 year olds left on a mere £7,666 a year, almost half the adequate standard of living (£14,400*), according to data from Aon Consulting, the leading employee benefits and risk management firm. 

As experts continue to debate the future of the economy – with predictions varying from recovery to double dip recession – the UK’s pension investors continue to see falling returns.  The predicted retirement income of a 65 year old now falls below 50% of the adequate standard of living.  Even those who plan to move to cheaper countries in their retirement (recent Aon research** found that 1 in ten Brits (10.8%) would like to retire to Spain) would struggle to achieve a decent standard of living in their country of choice.
 
The Aon DC Index follows the projected retirement income of individuals at different ages who contribute 10% of a £25,000 salary to a defined contribution (DC) pension arrangement and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above.

Retirement income projections
Based on data collected on 31st July 2010 compared to a month previously, 30th June 2010, the projected annual retirement income of typical DC pension investors at different ages over the two year period is as follows:

• 30 year old: from £19,863 to £19,344 (£518 decrease)

• 60 year old: from £10,824 to £10,466 (£358 decrease)

• 65 year old: from £7,925 to 7,666 (£259 decrease)

Richard Strachan, senior consultant at Aon Consulting, commented: “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.

“As some areas of the economy forecast growth and others continue to struggle, making the right investment choices is key for any pension investor, whether individual or institutional.  Employers should ensure their pension schemes – and their default funds, in particular – are invested wisely to maximise the green shoots of recovery.  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."
 

ENDS

Notes to Editors
* As projected by the Joseph Rowntree Foundation.

** This research is part of the Aon Consulting European Employee Benefits Benchmark, a survey of more than 7,500 workers from across Belgium, Denmark, France, Germany, Ireland, The Netherlands, Norway, Spain, Switzerland and the UK.

About The Aon DC Pension Index
The Aon DC Pension Index analyses the impact of market changes on the pensions of average workers. The research calculates the expected pension income at retirement for individuals, based on assumptions for future investment return and inflation as well as taking into account the actual changes in investment performance and annuity rates.

The Aon DC Pension Index examines the changes in workers’ pensions month on month, depending on different age groups and assuming 100% of the pensions are invested in equities. It tracks the income in retirement of individuals at different ages who contribute 10% of their £25,000 salary to their retirement savings and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above.
 

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About Aon Consulting
Aon Consulting is among the top global human capital consulting firms, with more than 6,300 professionals in 229 offices worldwide. The firm works with organizations to improve business performance and shape the workplace of the future through employee benefits, talent management and rewards strategies and solutions. Aon Consulting was named the best employee benefit consulting firm by the readers of Business Insurance magazine in 2006, 2007, 2008 and 2009. For more information on Aon Consulting, please visit http://www.aon.com/human-capital-consulting.
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