UK - The annual income that a person receives in retirement has been cut by nearly 80% over the last 10 years, new research has revealed.
Watson Wyatt said lower returns on investments meant the pension pot after saving for 20 years was less than half what it would have been 10 years ago and annuity rates used to convert pension pots into income have reduced by nearly half over the same period. The combined cuts lead to an income down 78% for savings of identical amounts.
The results were published ahead of a Whiteall Pensions Summit hosted by pensions minister Stephen Timms, at which the Turner Commission’s proposal for a National Pensions Saving Scheme (NPSS) will be discussed.
“People on average incomes, or those saving with the benefit of a significant employer contribution may be able to tolerate wide fluctuations [in savings’ returns] but it is less clear that NPSS will provide pensions that are suitable for the vast bulk of savers who need the proceeds from NPSS in order to provide even a basic standard of living in retirement,” said Stephen Yeo, senior consultant at Watson Wyatt.
“If the government opts for a system where individuals bear all the investment and longevity risk there is a good chance that a significant number of them will end up with inadequate pensions.”
He added: “Unfortunately, private sector employers are now in sharp retreat from sharing any of the risks of providing pensions and the Pensions Commission’s recommendations will do little to arrest this trend.”
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