UK - Defined contribution (DC) pension assets have grown for the second consecutive month to reach a combined total of £418bn (€477bn), according to Aon Consulting,

Figures from the firm's monthly DC Pension Tracker revealed over the last month the value of the DC assets increased by 10% following a "bullish" performance in global equity markets.

However, Aon admitted that despite the recent improvement, a further 32% increase is needed to bring the value of DC pensions back to the same level as before the credit crunch, when they were valued at around £550bn in September 2007.

Aon claimed the improvement means a 30-year old worker - saving 10% of a £25,000 salary in a pension - would have seen their projected annual pension increase by 0.6% to £20,0001 a year over the last month.

Meanwhile, a a 65-year-old saving the same amount and fully invested in equities would have recorded a 3.7% increase to £7,133 a year, up from £6,880 in March 2009, although this is still 40% less than in September 2007 when the prospective pension was £12,521.

In comparison, Aon suggested a 65-year-old saving the same amount but invested in cash and gilts would have experienced less volatility over the last 19 months yet would still have benefited from the improvement in global equity markets as their total pension would have increased to £12,258 a year, albeit still just under the £12,521 in September 2007.

The firm said the impact of the volatility could be making it difficult for older workers to judge when to retire as the recent improvements meant if somebody retired on their 65th birthday in January their pension would have been worth £266 a year less than someone retiring at the same age in April.

Helen Dowsey, principal at Aon Consulting, pointed out that although the rally in global stock markets has had a positive effect on the projected retirement income for UK retirees, "unfortunately because annuity rates are still low this has wiped out some of the investment gain", and admitted "it is far too early to say we are witnessing a recovery as yet".
She also acknowledged that for older workers "when to retire can be a birthday fluke with some doing significantly better than others by virtue of their birthday falling at a time when the markets are up".

However, Dowsey added: "By ensuring sensible investment policies are adopted in the years running up to retirement this "birthday fluke" can be avoided. In particular, by moving assets from riskier classes to those that better match the prices of annuity rates it has been possible to weather the storm of the credit crunch for those close to retirement."

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