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Older savers reap rewards of asset growth at close of 2021

Older savers reap rewards of asset growth at close of 2021

Older savers with bigger pension pots experienced greater lifts to their expected retirement living standards than their younger counterparts towards the end of last year, new research has revealed.

Strong investment returns in the final quarter of 2021 helped to push Aon’s DC tracker up from 58.4 to 59.7 over the period, indicating that sample savers are on average expected to have a marginally higher standard of living when retired than anticipated at the start of the quarter.

While higher at the close of the fourth quarter, the tracker sat at a similar level to its position at the start of 2021.

Savers aged 40 and 50 years old registered the biggest increases to their expected benefits over the quarter, which rose by around £400 a year and £500 a year respectively.

During the year, the 50-year-old saver was by far the biggest gainer owing to the value of their existing funds, which were expected to rise annually by nearly £2,000.

The 40-year-old saver was expected to be around £550 a year better off compared with their position at the start of 2021, while the 60-year-old saver’s income was expected to have lifted by around £700 a year.

The youngest saver, meanwhile, experienced the smallest uplift in expected income over the final quarter, sitting at around £125 a year.

Aon said this was because of their smaller existing fund and “the impact of a slight reduction in future expected returns”.

Over 2021, the younger saver experienced a reduction in their expected income of around £450, despite healthy investment returns.

Aon added, however, that the oldest saver is expected to be the “worst off” in retirement with an income sitting between “the minimum and moderate standards of living”.

The younger three savers surveyed are all predicted to enjoy retirement between moderate and comfortable living standards.

Alex Janiaud is deputy editor at FTAdviser's sister publication Pensions Expert