Pension values on rise at last: Good news for Britain’s under-pressure savers

BRITAIN’S pension pots are nearing a record high as savers benefit from a resurgent stockmarket. A typical pension’s value has risen steadily since the 2008 financial crisis, research reveals.

The average fund has grown by 136 per cent since 2002, with younger generations benefiting the most. Workers aged 25 to 34 have seen a 168 per cent rise in 14 years while those nearing retirement will benefit from a 120 per cent surge.

The pension boom is the result of buoyant stocks and shares, a report explains. The UK now has more than 12 million defined contribution pension savers. These pots are taking over from the final salary defined benefit schemes that many employers are now closing because they are too costly.

The average pot stood at £15,579 in April, just below the record high of £16,062 in the first three months of 2015, a Close Brothers Asset Management study found. The firm analyses the impact of financial markets on pension pots.

Long term benefits are even more tangible – it’s time in the market, rather than timing the market, that counts
Spokesman Andy Cummings
Its spokesman Andy Cummings said: “There is no doubt that markets matter to pension savers. “The market rebound since January alone would provide an entire year of extra income in retirement for savers.

“Long term benefits are even more tangible – it’s time in the market, rather than timing the market, that counts.

“Pension savings are clearly worryingly low across all age groups as generous schemes fall by the wayside.

“People cannot escape the need to save more.

“But it’s important that they understand how financial markets can do a lot of the heavy lifting.

“If savers opt to take no risk, or simply stuff cash under the mattress, they will never hit retirement goals. Or they would have to set aside increasingly unaffordable sums while working.”

The average 65-year-old pension saver had a pot of £29,417 in April, a growth of 120 per cent since 2002. This is less than their younger colleagues investing over the same period.

But lower risk in their portfolios, especially in the run-up to retirement, benefited them during the volatility of the stockmarket in January. At that point older savers saw a fall of just one per cent in the value of portfolios, compared to five per cent among the 25 to 34-year-olds.

However, this also means their savings have increased by just three per cent since. For the younger generation the increase has been seven per cent. At the end of April, typical 25 to 34-year-olds had pension savings of £5,360.

This was worth £2,001 in 2002, excluding the impact of any additional contributions. During the financial crisis of 2008 their pensions almost halved in value to £2,392. But the rebound in the stockmarket means they have more than made up these losses.

Elliott Silk, head of employee benefits at financial group Sanlam, said: “Young people are beginning to understand saving for retirement is important. “It’s also important they really engage with the way those savings are invested.

“With the demise of final salary schemes, they have been forced to look elsewhere to build up their funds. Taking an appropriate amount of risk early on will likely pay dividends later on in life.”

Steve Wilkie, of retirement specialist Responsible Life, added: “This report highlights the value of regular saving into a pension, to smooth out financial market turbulence.

“Since the start of the year it’s been a torrid time. But if pension savers don’t have to withdraw money from their pensions immediately, these are periods of financial unrest they need to ride out."