Research by Investment Life & Pensions Moneyfacts shows that average retirement income have hit a two-and-a-half year high, thanks to the dual combination of better performing pension funds and higher pension annuity rates.
The pension funds returned 13.83 percent on investment in 2010, registering double digit growth for the second consecutive year. The performance of the funds has been steady this year as well, it observed.
Average annuity rates grew for the sixth month in a row in April, the first time since August 2008, which the monthly magazine termed as ‘encouraging news’.
The survey found that based on a £10,000 purchase price of a most popular type of standard annuity – the single life-level-without guarantee, the average income for a male aged 65 years has increased by 3.6 percent to £629per annum from £607.
The average annuity income from a similar plan for an equivalent female has increased £589 pa from £568 pa. Moneyfacts research showed that average annuity rates have reached their highest point since October 2009.
It observed that a gross contribution of £100 per month in a mixed investment 40-85% shares pension fund would have grown to £41,964 in 20 years if the savers had retired now, compared to £40,343 in December 2010.
However, the same investment a decade ago would have given 60 percent higher returns while 15 years ago the average retirement income would have been 80 percent higher.
“Given the headache high inflation is currently posing, the fact that annual retirement incomes have been rising since the turn of the year will at least offer a crumb of comfort for those on the verge of retirement”, said Richard Eagling, editor of Investment Life & Pensions Moneyfacts.
“Much of this recent increase is due to higher annuity rates, a trend that is unlikely to persist in the long term. Sadly, the recent uplift in average retirement income may ultimately prove to be little more than a temporary respite in the uphill battle to secure a comfortable retirement”, he added.