Rise in expected annual pension for UK workers

Retirement income for UK employees has improved in the past month, according to Aon Hewitt’s DC Index.

The index showed an increase in projected annual pension, especially for 30 year olds who have seen a £403 increase to the retirement income they can expect to receive.

However, although 30 year olds’ average annual retirement income has increased to £19,656, it is considerably less than their estimated figure of £20,307 recorded in April 2010, and £20, 992 in October 2009.

The index also revealed a small improvement to the expected retirement income 60 and 65 year olds can expect, with a £48 and £32 increase 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) pensions scheme and have an existing fund (valued as at September 2007) of £15,000 for age 30 and £150,000 for ages 55 and above.

Chris McWilliam, senior consultant at Aon Hewitt, said: “For the second month in a row, employees have seen a welcome boost to their retirement income.

“Although this is brighter news following months of gloom, it remains important for members to understand the effect that market fluctuations and the broader economic environment can have on their retirement income.

“Indeed, with the removal of a default retirement age, workers will appreciate they have substantially more flexibility over both the timing and manner in which they eventually come to draw benefits.

“While retirement prospects are improving it is also crucial that individuals understand the need for making meaningful contributions to their pensions over an extended period of time to ensure a healthy pension pot upon retirement.”

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