UK Personal Pension Payouts a Shadow of 1990s Payouts

The financial database firm, Moneyfacts, which commissioned the study, said the figures showed savers faced a tough job funding their retirement using a personal pension, according to a new report in the UK newspaper The Guardian.

According to the newspaper, p ension experts say that steep cuts in insurance company annuity rates combined with falling investment returns have compounded the problem, leaving savers worse off. Those who save into a personal pension plan either on their own or through their employer will have to step up their savings rate to get the payouts seen in the 1990s, the newspaper said.

Ros Altmann, a former government adviser, said the death of the final-salary pension and shift to personal pension schemes has caused great uncertainty over retirement income. The government wants up to 10 million workers currently without a pension to contribute to a new personal pension-style plan.

Few details have yet to be published about it, but it is expected to mimic standard personal pension investment strategies, which rise and fall with the value of shares and bonds.

According to the newspaper, on average, a pot built up over 20 years with contributions of £500 a month was worth about £60,000 in 1996 while such contributions over the same period generated only £26,000 in 2006. Also, annuity rates have fallen by about 40% on average since 1996.

Moneyfacts said the figures were drawn from with-profits personal pensions, widely sold by insurance companies in the 1970s and 1980s.