Small shifts in asset allocation could boost pension pots, highlighting the need for defined contribution (DC) members to take control of their investment strategy, says Aon Consulting.

Members of UK DC pension schemes saw their combined assets and projected retirement incomes fall from £526bn at the end of 2009 to £509bn in January 2010, a result of stock market losses and worsening annuity rates.

The February DC Pension Tracker by Aon, looks at small changes in asset allocation which could yield different returns, and shows the first dip in projected retirement incomes since October 2009.

Drops in projected annual retirement income could see a 30 year old expecting to pick up £20,164, down from £20,574 at the end of last year. Likewise, a 60 year old has a projected annual retirement income of £11,216 compared to £12,125 at the end of last year.

When comparing returns from asset allocations, the Tracker shows that a 60 year old who invests 50 per cent in equities and 50 per cent in overseas equities could receive almost £1,000 more by changing the strategy to 90 per cent cash and ten per cent gilts, or 25 per cent cash and 75 per cent gilts.

"DC assets have fallen again, highlighting the need for pension savers to remain active in managing their retirement funds," commented Richard Strachan, senior consultant at Aon Consulting. "The differences in projected retirement income achieved through different asset choices show how choices made by DC scheme members affect their annual income in retirement.

"Employers running DC pension schemes have a duty of governance to ensure their members are aware of the investment options open to them, and are sufficiently informed to enable them to exercise their choice."

Strachan added that, while it may not have the same result as winning the EuroMillions, a greater interest in investment strategy could enhance retirement income. "For a 60 year old, the difference could be over £800 - the cost of a luxury holiday or golf club membership."

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