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.
963 IFAs surveyed
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Industry Voice: For generations, life expectancy has been steadily increasing, with more and more people now likely to live to 100.
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