The average pension saver has lost £2,750 a year from their future income in retirement over the last year, research finds.

The Alexander Forbes National Pension Index – which tracks projected retirement income benchmarked at the year 2000 – fell from 67.4 to 58.9 in the 12 months to March.

This drop equates to a loss of £2,750 a year compared with last year and £13,000 compared with the turn of the millennium.

The average 30 year old in 2000 could have expected contributions of about 12% of salary to be enough to provide two-thirds of income in retirement at age 65, but that same saver would now be expecting an income just 39% of final salary, down from 45% in March 2011.

The consultant added that proposed auto-enrolment contribution levels would result in a pension income for members of just one-third of final salary on retirement at 65.

Alexander Forbes Consultants & Actuaries principal consultant Alan Carey said the figures made difficult reading, but the news was not all bad.

“Pensions remain one of the most tax-efficient ways for people to make long term savings,” he said. “Many employers make generous contributions to defined contribution pension savings, which is in effect additional ‘deferred pay’ for workers and by taking advantage of workplace ‘salary sacrifice’ people can boost their pension savings further.

“The real message of this year’s National Pension Index is that people need to understand and take control of their own pension savings as soon as possible, as a few low cost changes made early can make all the difference to people’s financial security in retirement.”

Source : IFA Online