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Defined contribution pension assets increase by 10% since April

David Woods , 26 May 2009

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Thanks to a 'bullish performance' by global equity markets, the asset value of UK workers' defined-contribution (DC) pension accounts has increased by 10% since April to a combined total of 418 billion.

Things are looking up for defined contribution pensions but their value is still much lower than in 2007

According to a report from Aon Consulting, the outlook for pensions is improving but there needs to be a further 32% increase to bring DC assets back to the £550 billion value of 2007.

But the good news brings difficult decisions for older workers because an employee who turned 65 in January this year will have a pension income of £266 less per year than an employee with a 65th birthday in April.

Helen Dowsey, principal at Aon Consulting, commented: "Global stock markets have seen one of the strongest rallies ever over the past month which has had a positive effect on the projected retirement income for UK retirees. Unfortunately, because annuity rates are still low this has wiped out some of the investment gain.  
 
"But, given DC pension pots have fallen dramatically since the beginning of the credit crunch, it is far too early to say we are witnessing a recovery as yet.
 
"For older workers, when to retire can be a birthday fluke with some doing significantly better than others by virtue of their birthday falling at a time when the markets are up. However, by ensuring that sensible investment policies are adopted in the years running up to retirement, this birthday fluke can be avoided.  In particular, by moving assets from riskier classes to those that better match the prices of annuity rates it has been possible to weather the storm of the credit crunch for those close to retirement. It is never too late to consider the best investment strategies and figure out exactly what is needed to live on in retirement and how best to get there."

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