New research from A on Hewitt, the pension’s consultant has shown that since May the FTSE 100 has fallen by 15pc. This is having a direct impact on the projected income of workers saving in company defined contribution pension (DC) schemes.
In its latest DC index tracker report into the Ã‚Â£500bn DC market, it said that a 30 year-old’s expected retirement income has fallen from Ã‚Â£19,238 to Ã‚Â£18,399 a year, since the market turmoil began three months ago.
The situation is worse for workers in DC schemes who have retired over the summer – or are about to retire. They have been hit by a double whammy of tumbling share prices and sliding annuity rates, which are 5pc lower than they were in June. Annuity rates falls have knocked around Ã‚Â£500 a year off their pension income in retirement, Better Retirement Group said.
Pension experts said that the market falls highlight the fragile nature of DC, which are the pension fund choice for employers following the demise of generous final salary schemes.
Earlier this month, research from PwC’s revealed that plummeting stock markets have left many DC pension savers feeling they are in a worse position than if they had kept cash savings.