By Charlotte Beugge
Today's 60-year-olds may not feel it,
but as far as pensions are concerned it appears they are the lucky ones,
according to figures from actuaries Barnett Waddingham.
A 60-year-old retiring now with a
defined benefit (such as a final salary) pension scheme could expect a
retirement income of around £21,070 based on the national average salary of
£31,600.
Even if they have a defined
contribution (or money purchase) pension then they can expect an income of
around £13,330. But someone aged 20 starting work today could expect an income
of just £6,440 a year in today's money.
That figure is based on a defined
contribution scheme, because in reality most 20-year-olds starting work now
will be going into these schemes rather than defined benefit, which are
becoming increasingly rare particularly in the private sector.
Barnett Waddingham says that the huge
difference between the two defined contribution scheme figures are due to
expected increases in life expectancy, resulting in poorer annuity rates for
the 20-year-olds when they come to retire.
In addition, it says that there is an
expectation that stock market returns in the future will not be as good as in
the past 40 years, resulting in smaller pension pots for today's 20-year-olds
to spend on annuities when they retire.
It adds that even if they were to save
into their pension for another five years and not draw a pension until they
were 65, today's 20-year-olds could still only expect a pension of £9,300.
