Personal pension returns have dropped by half over the past six years, reveals Investment, Life & Pe...
Personal pension returns have dropped by half over the past six years, reveals Investment, Life & Pensions Moneyfacts in their latest pension survey.
A person retiring today would, according to the survey, only receive 51% of what a person, who would have saved exactly the same amount and during the same period of time, would have obtained six years ago.
A 65 year old man retiring in January 1997 would, after have been making contribution to a personal pension for 15 years, have had on average a total of £24,617 in his with profits pension fund or have a unit-linked fund worth £19,195.
However, the very same man retiring today, six years later, would only receive £16,514 or £9,867 respectively.
This is a 33% drop in the average with profits pension value and a 49% drop in the average unit-linked pension.
Even by choosing the best performing maturity values and a longer investment, the decrease becomes obvious, says Investment, Life & Pensions Moneyfacts.
In January 1997, the best maturity value for a with profits pension over 25 years was attained by Scottish Widows at £151,616, compared to today's highest return from Wesleyan Assurance at £114,982.
Decreasing annuity prices have further intensified the problem, adds Investment, Life & Pensions Moneyfacts.
A pension fund of £100,000 that would, six years ago, have bought a man aged 65 an annual annuity of £11,020 if choosing the best standard annuity rate, would today only produce a yearly income of £7,280, a total drop of 32%.
"It is clear that advisers and clients need quickly to realise the severity of the current pension climate and act accordingly," says Richard Eagling, editor of Investment, Life & Pensions Moneyfacts.
"Private pension provision is still being neglected, and with pension performance struggling there is real danger that tomorrow's pensioners will end up in poverty," he adds.
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