A study commissioned by the Trades Union Congress (TUC) has revealed that volatility in the pensions market could cause those saving for retirement to lose up to £5,000 in their annual pension payments.
The Pensions Policy Institute (PPI) analysed historic investment returns on behalf of the TUC, and found that the size of an individual’s pension pot may vary by up to 40%.
As a result, a man who has been in a defined contribution pension scheme for 40 years, who earns a median wage, could earn an annual income of £16,804 if he were to retire in 2017. In 2000, the same worker would have been able to retire on an annual income of £27,871.
However, the research showed that, whilst the impact of investment returns on women’s pension savings is similar to that of men’s, women are more likely to be reliant on the state pension.
Commenting on the matter, Frances O’Grady, General Secretary of the TUC, said: ‘Someone who has saved all their working life should not have to play roulette with their pension fund. But if their retirement lands on a bad year, market volatility could leave them with a much poorer standard of living for the rest of their life.
‘Every saver should be enrolled into a well-governed scheme that is able to cushion members from the worst markets can throw at them.’