The average DC scheme private sector worker lost a further £1,300 per annum of their future retirement income in the last six months of 2011, according to the Alexander Forbes National Pensions Index. The typical investor would therefore have to invest 38% of final salary, up from 33% in March, as the index value has dropped by 4.2 points.

In the six months from March 2011, the index value fell from 67.4 points to 63.2 points. In 2000, for a 30 year old, contributions of around 12% of salary would have been enough to provide 67% of retirement income at age 65, while these contributions would now only provide an income of 43% of final salary, down from 45% in March.

Alexander Forbes Consultants & Actuaries principal consultant Alan Carey said: “The last six months of 2011 have been dire for DC pension savers, a combination of falling growth asset values, reduced bond yields and ever increasing longevity have combined to further reduce the value of workers’ pension savings.

“The most important message for DC savers from the index is the importance of reviewing their projected income regularly, rather than assume that assumptions made about pension savings many years ago still hold true today, as in all likelihood they will not.”

Alexander Forbes head of defined contribution delivery Steve Watson emphasised the importance for DC scheme members to keep track of their savings in order to avoid facing an ‘impoverished retirement.’

“I cannot overemphasise the importance of people regularly reviewing their DC pension savings. By making relatively small changes to their contributions on a regular basis they can stay on track for a comfortable retirement, but any delay means that their original retirement expectations will quickly become out of reach,” he said.

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