PEOPLE reaching pension age this year are set to receive annual retirement incomes that are a whopping 72.7 per cent lower than those received by retirees 15 years ago, according to new research.
There has been a 7.9 per cent drop in annuity incomes just over the past year, says data from personal finance portal Moneyfacts.
Although the average annual contribution per person has more than doubled since 2001-02 from £1,720 to £3,510 in 2012-13, the decline in incomes shows that contributions have still not risen quickly enough to compensate for lower investment returns and falling annuity rates.
“Private pension provision is still being neglected, meaning that there is a real danger that tomorrow’s pensioners will end up in poverty,” said Moneyfacts’ Richard Eagling. “Dreams of a comfortable retirement could easily be shattered unless individuals can either make up the pension shortfall through greater contributions or accept that they may have to delay their retirement.”
THE GREAT PENSION SQUEEZE
• GOING... A pension fund maturing in September 2000 had an average value of £89,366 and produced an annual retirement income of £7,748
• GOING... By September 2014, the average value had dropped to £44,089, with an annual income of £2,292
• GONE... By September 2015, the average pension pot is worth £42,440 and pays out £2,109 per year (Based on a 65-year-old man who pays £100 per month for the past 20 years)