Some good news; DC pension funds and higher UK pension annuity rates; better annuities resulting. Surging stockmarket prices mean many employees may be able to retire earlier than recently feared in order to retire on a reasonable annuity income, according to calculations from leading consultants, Mercer. Its DC Barometer shows how changes in pension annuity and investment markets, as well as contribution levels, can influence the anticipated retirement age and pension income of defined contribution (DC) pension scheme members.
Comparing stockmarket conditions and annuity rates movements at the end of December last year and the end of December 2008, Mercer’s barometer showed a sample DC scheme member considering retirement soon would now have to work around 15 months less in order to retire on the same level of income. Steve Charlton, a principal of Mercer, said that with the recent turbulent stockmarket conditions around the world and volatile UK annuity rates, the outlook for people approaching retirement is looking better now than it has over the previous nine months.
He adds that at the worst point, in March last year, a DC scheme member would have found themselves working to nearly age 67 instead of 65, to achieve the same level of retirement income. Mercer’s findings highlight that the timing of retirement can be very important for members of DC schemes. With the rise and fall of stockmarket prices and annuity rates, the value of individual pension funds can swing up and down, and significantly influence people’s quality of life in their retirement.
