The Aon UK DC pension tracker increased from 69.7 to 72.7 over the quarter, March to June 2023, suggesting that the expected future living standard in retirement provided by defined contribution (DC) savings was higher than at the end of the previous quarter.
The increase is mainly because the state pension went up in April 2023. Older savers were also expected to get more from their personal pension savings during this time. However, younger savers were projected to receive less because future returns were expected to be lower.
Meanwhile, the state pension increases each year in line with inflation, average earnings, or a minimum of 2.5 per cent. Due to current inflation rates, it went up by £972 in April 2023. The full state pension is £10,600 per year, which is almost enough for a basic retirement. But if you want more than the basics, you’ll need to rely on your own pension savings.
Aon partner and head of UK retirement policy Matthew Arends says: “This period’s Aon UK DC Pension Tracker shows that older savers were detrimentally affected by poor actual returns over the quarter. By contrast, the actual returns for younger savers were relatively strong but it was this group that was the most impacted by falls in expected future returns.
“However, all members benefited from the increase in the State Pension that was implemented from April. This more than compensated for the negative factors, meaning that each of our savers had a higher score at the end of the quarter.”
Arends adds: “Higher levels of price inflation have fed through into our example savers’ projected retirement incomes via the triple lock indexation of the State Pension. This will be particularly relevant to savers on lower income levels for whom the State Pension will be most, or all, of their expected retirement income.
“However, savers must have 35 qualifying years of National Insurance contributions to receive the full State Pension. All savers can check their State Pension forecast at www.gov.uk/check-state-pension.”
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