Leading investment platform interactive investor, have this week released figures that would suggest that lower growth in pension investments will leave pension savers with a third less in their pension pot values.
interactive investor have warned pension savers to consider the dwindling value of their pension investments, with the potential need to contribute half as much on top of their current contributions, in order to make up for this shortfall. Their report clearly illustrates that savers on average salaries, contributing 8% of their pay a decade ago, would today need to contribute 12% in order to bridge the gap and achieve the same pension value as would have been predicted a decade ago.
This change in pension outcomes is largely due to diminishing returns from equity and bond markets. 8% represents the minimum statutory contribution amount for auto enrollment pensions, however, interactive investor no longer believe this to be a sufficient amount for pension savers.
Becky O’Connor, Head of Pensions and Savings, interactive investor, said:
This report highlights the impact of lower forecast investment growth on pension pots and the profound implications for the generations of workers whose retirement pots are fully exposed to the fortunes of global markets, without many even knowing.
“‘Lower for longer’ investment growth could mean the difference between scraping-by and being comfortable in retirement, but the impact of stock market performance on retirement outcomes may be poorly understood.
“Now we live in a potentially lower growth world, this needs to be reflected by recommendations for higher minimum pension contribution amounts.”
Interactive investor have however assured savers that a pension is still the most effective way to save for retirement, largely due to the generous tax breaks that they attract. interactive investor offer users access to their low-cost SIPP and new users can take advantage of their six-month free offer on all SIPPs.