DC Pension assets return to pre-recession value

LONDON.- The UK’s defined contribution (DC) pension funds have returned to the value they were in September 2008 at about £450 bn - overcoming fluctuating investment returns during the last turbulent twelve months and a record dip to £344 bn in March this year - according to new analysis by Aon Consulting, the leading employee risk and benefits management firm.

Aon’s 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% 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 DC Pension Tracker for July shows total DC assets in the UK as being worth £451bn, only one billion more than their £450bn value in September 2008. This month’s figures rose by £31bn, or 6.8%, in the month to 31 July from £420bn at the end of June. The gains are largely thanks to rallies in the equity markets, and demonstrate the volatility of UK workers’ retirement savings.

Currently, projected pension income for typical workers with average pension contributions are as follows:

30 year old worker
A younger worker has seen their projected annual pension income increase to £21,410 over the last month. This is a rise from £20,659 and the highest figure since October 2008, when it would have been worth £21,489.

60 year old worker
The 60 year old fully invested in equities has also seen a sharp rise in the value of their projected pension, up from £10,373 at the end of June to £11,384 at the end of July. This is the highest their projected income has been since September 2008, when it stood at £12,048.

Helen Dowsey, Head of DC at Aon Consulting, commented, “These figures look promising as we return to asset figures roughly at the same value as they were a year ago. However, this month’s figures serve to underline the volatile nature of DC investment. Someone retiring at the end of July may have a significantly higher projected retirement income than someone retiring a month before. These volatile conditions highlight the need for workers to pre-plan for their pension, and understand and regularly review their investments, whose value can change dramatically in a short space of time.

“Employers and trustees of occupational DC schemes have a key role in educating their DC scheme members - particularly those approaching retirement - to help them understand what they can do within their pension investments to mitigate this volatility.”