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Crunch cuts quarter off DC pensions

Britain’s defined-contribution pension assets have lost around £140bn, over 25 per cent of their value, since the start of the credit crunch, according to Aon Consulting.

The firm’s new research tool, the Aon DC Pension Tracker, shows the value of DC pension assets stood at £550bn in the beginning of the crisis in September 2007 and 16 months on, at the end of January this year, the value had been slashed to £410bn.

The DC pension tracker aims to provide a realistic gauge of how the nation’s combined DC pension pot, into which over 3.7 million UK workers pay, is faring. It tracks the change in size of the DC pension market and calculates the expected pension income at retirement for people of different ages.

It shows that a 60-year-old who is contributing 10 per cent of their £25,000 salary and expecting to retire in five years has seen their total projected pension fall by 36 per cent, meaning they can now expect to receive £10,900 annually compared with the £17,100 forecast in September 2007.

The impact on younger workers is not so severe, according to Aon. A 30-year-old employee over the same period has seen their projected pension fall 8.5 per cent, as the effect of the current economic crisis is tempered by future contributions and the length of time until retirement.

Principal Helen Dowsey says: “Over the last year, DC pension scheme savers have been hit hard by the falls in equity markets and people need to take an active role in reviewing their pensions. We urge both employers and employees to maintain the long-term view that pensions are the best way to save for retirement.”

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