Workers must be protected from pension roulette

31 October 2017

New analysis finds market volatility can cost savers up to £5,000 in their annual pension payment.

A typical worker could be £5,000 a year poorer in later life if they retire after a bad year for pension funds rather than in a good year, research commissioned by the TUC has shown.

Analysis of historic investment returns by the independent Pensions Policy Institute found that a pension saver’s pot size can vary by up to 40%, and it’s just the luck of the draw.

This can mean a difference of as much as £5,000 a year for life for a man on median earnings who has been in a defined contribution scheme for 40 years.

The impact of investment returns on the workplace savings of women is similar. However, due to a pattern across the last 40 years of lower wages and savings for women workers, female retirees are likely to have greater reliance on the state pension. The analysis therefore focused on historic figures for median male earners.

TUC general secretary Frances O’Grady said:

“Someone who has saved all their working life should not have to play roulette with their pension fund. But if their retirement lands on a bad year, market volatility could leave them with a much poorer standard of living for the rest of their life.

Every saver should be enrolled into a well-governed scheme that is able to cushion members from the worst markets can throw at them. And it is time to implement plans that were passed into law two years ago for collective pensions, which can be less volatile and more efficient than traditional schemes.”