Positive signs revealed as retirement income rises

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Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
01/08/2021

Positive signs revealed as retirement income rises

Consumers planning their retirement may find the latest analysis by Moneyfacts.co.uk encouraging as the combination of positive pension fund growth and annuity rate increases during Q2 2021 has seen the average retirement income rise.

  • Retirement income has increased by 21.2% on average compared to a reduction of 11.9% a year ago. This is based on a consumer who saves £100 gross per month into a personal pension over 20 years and then takes out an annuity.
  • The average annuity increased by 1.4% during Q2 2021, versus 0.7% in Q2 2020.
  • Pension funds during Q2 2021 returned 4.1% on average, versus 13.3% during Q2 2020.
  • The top three performing Association of British Insurers (ABI) pension sectors during Q2 2021 were: UK Smaller Companies (9.5%), North America Equities (7.8%), Property Other (7.5%).
  • Separate analysis from LV= revealed more than a third (35%) of pension holders knew nothing about product options at retirement and 35% knew nothing about stock market falls and its impact on retirement savings.

Positive signs revealed as retirement income rises

Consumers planning their retirement may find the latest analysis by Moneyfacts.co.uk encouraging as the combination of positive pension fund growth and annuity rate increases during Q2 2021 has seen the average retirement income rise.

  • Retirement income has increased by 21.2% on average compared to a reduction of 11.9% a year ago. This is based on a consumer who saves £100 gross per month into a personal pension over 20 years and then takes out an annuity.
  • The average annuity increased by 1.4% during Q2 2021, versus 0.7% in Q2 2020.
  • Pension funds during Q2 2021 returned 4.1% on average, versus 13.3% during Q2 2020.
  • The top three performing Association of British Insurers (ABI) pension sectors during Q2 2021 were: UK Smaller Companies (9.5%), North America Equities (7.8%), Property Other (7.5%).
  • Separate analysis from LV= revealed more than a third (35%) of pension holders knew nothing about product options at retirement and 35% knew nothing about stock market falls and its impact on retirement savings.
 

Q2 2020 (1 April to 1 July)

Q2 2021 (1 April to 1 July)

Average pension fund

13.3%

4.1%

Pension funds positive returns

95%

91%

Average annual annuity income (standard annuity age 65 no guarantee)

0.7%

1.4%

Personal pension for 20 years (£100 pm gross saved, average pension fund)

£46,318

£53,378

Using pension pot to take an income through an annuity

£1,875 per annum

£2,273 per annum

Average retirement income compared to one year ago

-11.9%

21.2%

Top three Association of British Insurers (ABI) pension sectors

Commodity/Energy (37.5%), North America (22.9%), Europe Excluding UK equities (21.1%)

UK Smaller Companies (9.5%), North America Equities (7.8%), Property Other (7.5%)

Source: Lipper / Moneyfacts.co.uk

 

Q2 2020 (1 April to 1 July)

Q2 2021 (1 April to 1 July)

Average pension fund

13.3%

4.1%

Pension funds positive returns

95%

91%

Average annual annuity income (standard annuity age 65 no guarantee)

0.7%

1.4%

Personal pension for 20 years (£100 pm gross saved, average pension fund)

£46,318

£53,378

Using pension pot to take an income through an annuity

£1,875 per annum

£2,273 per annum

Average retirement income compared to one year ago

-11.9%

21.2%

Top three Association of British Insurers (ABI) pension sectors

Commodity/Energy (37.5%), North America (22.9%), Europe Excluding UK equities (21.1%)

UK Smaller Companies (9.5%), North America Equities (7.8%), Property Other (7.5%)

Source: Lipper / Moneyfacts.co.uk

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Consumers’ plans for putting money into their pension may have been disrupted by the Coronavirus pandemic, so it’s good to see positive returns on most fund sectors during the last quarter. Due to a combination of pension fund growth and a rise to annuity rates, there has been a notable improvement to the average retirement income during Q2 2021. Those who saved £100 gross per month for 20 years into a personal pension would have built a pot of £53,378 on average and taking an annuity at age 65 would result in a yearly income of £2,273. This has risen from Q2 2020 where the pot stood at £46,318 and the yearly income at £1,875.

“Seeking advice to keep on top of volatility in the stock market is always wise, but so is discussing any concerns about having enough for a comfortable retirement and the product options available. A recent study from LV= revealed not all consumers know about different products at retirement and worryingly, some are unaware of how stock market volatility can impact their pension pot. Making a rash decision to switch funds without good advice during an unsettled period could result in missing out on any potential fund recovery. Choosing any new sector without guidance can be unwise as past performance is no guarantee for future returns.

“The age in which consumers are permitted to access their pot under pension freedom rules will rise to 57 by 2028 so it is important consumers understand how this will impact them and what changes to saving for retirement they can make right now. Those who feel they may fail to accumulate sufficient pension savings to achieve the retirement income they desire would be wise to seek advice on whether they should delay or consider other methods of plugging the gap.”

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Consumers’ plans for putting money into their pension may have been disrupted by the Coronavirus pandemic, so it’s good to see positive returns on most fund sectors during the last quarter. Due to a combination of pension fund growth and a rise to annuity rates, there has been a notable improvement to the average retirement income during Q2 2021. Those who saved £100 gross per month for 20 years into a personal pension would have built a pot of £53,378 on average and taking an annuity at age 65 would result in a yearly income of £2,273. This has risen from Q2 2020 where the pot stood at £46,318 and the yearly income at £1,875.

“Seeking advice to keep on top of volatility in the stock market is always wise, but so is discussing any concerns about having enough for a comfortable retirement and the product options available. A recent study from LV= revealed not all consumers know about different products at retirement and worryingly, some are unaware of how stock market volatility can impact their pension pot. Making a rash decision to switch funds without good advice during an unsettled period could result in missing out on any potential fund recovery. Choosing any new sector without guidance can be unwise as past performance is no guarantee for future returns.

“The age in which consumers are permitted to access their pot under pension freedom rules will rise to 57 by 2028 so it is important consumers understand how this will impact them and what changes to saving for retirement they can make right now. Those who feel they may fail to accumulate sufficient pension savings to achieve the retirement income they desire would be wise to seek advice on whether they should delay or consider other methods of plugging the gap.”

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way Moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

 

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way Moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert