The latest Aon Hewitt DC Index shows a £453 increase to the retirement income a 30 year old can expect to receive when he or she retires aged 65, the largest boost since July 2009. The projected annual retirement income of a 30 year old is now £19,253.
While savers now have some certainty over the maximum contributions they can make, there is still uncertainty over State Pension Age. The Index also reveals a small improvement to the projected retirement income a 60 and 65 year old can expect with their pots benefitting from annual increases of £125 and £94 respectively.
The Aon Hewitt 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
The projected annual retirement income of typical DC pension investors at different ages (based on data collected on 30 September 2010 compared to the previous month) is as follows:
– 30 year old: from £18,800 to £19,253 (£453 increase)
– 60 year old: from £10,518 to £10,643 (£125 increase)
– 65 year old: from £7,727 to £7,821 (£94 increase)
Richard Strachan, senior consultant at Aon Hewitt, commented: “While members will be pleased to see their funds have increased in value, they are by no means out of the woods. Given the rising levels of noise around the retirement age debate and length of time members may need to continue to work, employees need to seriously consider whether they are making realistic contributions to their pension pots and whether their monies are invested in the right type of investment strategy. For example, if members are looking towards partial retirement, then being in a lifestyle strategy – with its automated de-risking as members approach retirement – may not be the most appropriate strategy. Therefore, although positive, these monthly figures should not be a cue for complacency.”
Source : Aon Press Release
