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Pension funds may need additional boost

15 February 2010 / by Andy Davies

Future pensioners may not be able to achieve their desired standard of living from pension income alone, the Pensions Policy Institute (PPI) has warned.

According to the PPI's new report, pensioners of the future are likely to need of greater variety of income and assets to help fund their retirement.

The PPI claims that changes in the private pensions market which are leading to more pensioners receiving income for Defined Contribution (DC) schemes, mean that "many of the risks associated with pension saving" will be passed from the employer to the employee.

Commenting, Chris Curry, PPI research director explained: "Many median earners who contribute to DC pensions at average levels of 10 per cent of salary are unlikely to have sufficient state and private pension income to achieve a desired standard of living in retirement.

"In order to provide their desired retirement income solely through the state and private pensions, median earners reaching State Pension Age in 2030 may need to have around 15 per cent of their salary contributed to their private pension."

However, Mr Curry believes that forthcoming state pension reforms will mean that the state pension will provide "a much firmer foundation" for retirement income in future.

"By 2030, and assuming that Basic State Pension is re-indexed to earnings, it is more likely than today that lifetime low earners will be able to replicate working-life living standards in retirement," he said.

But he warned that a significant number of people will need to contribute more to their pension fund during their working life "to achieve a standard of living in retirement they might consider acceptable".

© Fair Investment Company Ltd