Rise in DC assets fails
to boost confidence

The UK’s combined
private defined contribution (DC) pension funds reached £507bn at the end of
September, rising by £21bn month-on-month due to stock market gains, but doubt
remain.

According to analysis by Aon
Consulting, the leading employee risk and benefits management firm. Research
from Aon also reveals that younger workers are far more worried about their
retirement finances than imminent retirees, paradoxically, this should be
viewed as a positive development, providing evidence that young people are
waking up to the pension problem, says Aon.

Aon’s monthly DC Pension Tracker
measures the total asset value of UK workers’ DC pension accounts.  It
also tracks the income in retirement of individuals at different ages who
contribute 10 percent of their £25,000 salary to their retirement savings and
have an existing fund (valued as at September 2007) of £15,000 for age 30 and
£150,000 for ages 55 and above.

The projected annual income from DC pension
savings for typical workers with average pension contributions has stayed
relatively stable over the last month, despite booming equity markets, this is due
to a rise in annuity rates. A 30 year old worker has seen their projected
income fall slightly to £21,255 (from £21,760 at the end of August), while a 60
year old has seen their projected income rise nominally to £12,086 (from
£12,021 at the end of August).

Additional Aon research*reveals
that, despite improvements to the nation’s pension savings since the dramatic
falls earlier this year, financial worries beat health, loss of status/self
worth and use of additional free time as the principal retirement concern for
65 percent of workers. Surprisingly, the young are twice as concerned about retirement
finance as some older workers.

Key Findings

• 71 percent of 25-34 year olds chose
  financial worry as their primary concern for retirement, compared to only 52
  percent of 55-64 year olds and merely 34 percent of 65 year olds
• 70 percent of females selected
  financial worry as their primary concern compared to just 55 percent of males
• 20 percent of men are worried about
  their health in retirement compared with only 14 percent of women.
• Men are twice as worried (10
  percent) as women (five percent) about how they are going to use the additional
  free time that retirement has to offer.
• Those on an average annual salary of
  between £10,001 and £20,000 and £20,001 and £30,000 per annum are nearly twice
  as concerned about finances in retirement, 67 percent and 71 percent
  respectively) than those in higher salary brackets – only 45 percent of those
  earning over £50,000 per annum.

15th October 2009

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