Pension pots continue to shrink

People’s retirement savings have shrunk further over the past four weeks, despite growth predictions for the economy, according to data from Aon Consulting.

The Aon DC index, which follows the projected retirement income of individuals at different ages who contribute 10 per cent of a £25,000 salary to a defined contribution pension arrangement, found that a 30 years old’s and a 60 year old’s annual pension income decreased by £518 and £358 respectively over the past month.

The figures also showed that the predicted retirement income of a 65 year old - just £7,666 a year - now falls below 50 per cent of the adequate standard of living. Even those who plan to move to cheaper countries in their retirement, such as Spain, would struggle to achieve a decent standard of living.

“Though was 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,” said Richard Strachan, senior consultant at Aon Consulting.

“Employers should ensure their pension schemes, and their default funds, in particular, are invested wisely to maximise the green shoots of recovery.”