A retiree looking to collect a pension of £25,000 per year needs a pot of £763,900 this year, up 29 per cent on the £590,200 required for a man in 2009 according to the Office for National Statistics (ONS).
Part of the jump is caused by new EU rules which prevent annuities varying depending on whether the buyer is male or female.
In 2009, before the rules came in, a woman needed a pension pot roughly 13 per cent larger than a man’s to get the same income, reflecting her better life expectancy.
But low economic growth has also had an impact, alongside very low interest rates. “The poor rates are largely because of rising longevity, new EU rules, and the weak economy. Insurers providing annuities are struggling with the investment returns on gilts that have been forced to low levels by quantitative easing,” said National Association of Pension Funds’ (NAPF) boss Joanne Segars.
“The offers that were on the table a few years ago have evaporated. It is more important than ever that people scour the annuity market for the best deal. Too many people take the first offer they see, and miss out on getting a better deal elsewhere.”
She also advised retirees to make sure to take health problems into account as declaring an illness can boost annual retirement incomes.
The ONS numbers showed pension savings rising gradually – median savings in working-age households increased from £54,000 in 2008 to £79,000 in 2010. Private pensions made up the largest proportion at an average of £53,000 in 2010.
Meanwhile Tesco announced plans to launch a pension annuity service, allowing customers to compare deals on their website.