Despite a 40 per cent recovery in stock markets since they hit rock bottom a year ago, defined contribution (DC) pension schemes are still substantially lower than their pre-recession levels, reports Aon Consulting.

The employee benefits and risk management firm's analysis shows that a DC member's £100 investment prior to the recession is still worth less than the original sum in real terms.
As for projected retirement income, changes in annuity rates and equity markets mean workers at different stages of their careers remain to see substantially lower projections than estimates two years ago.

The Aon DC Index looks at the retirement of individuals at different ages who contribute ten per cent of a £25,000 salary to a DC arrangement, and have an existing fund of £15,000 at September 2007 for age 30, and £150,000 for age 55 and above.

With the one year anniversary of stock market lows in March, the value of DC pensions has rebounded, but the scale of losses to pensions over the downturn is reiterated by the fact that £100 invested in September 2007 is only worth £97 today.

"We have seen a major recovery for DC pensions but this does not mean they are back to where they were - it's a 40 per cent recovery base on a lower starting point," commented Helen Dowsey, principal at Aon Consulting. "In absolute terms, a member's £100 invested in September 2007 is still not worth £100 now. The underlying message is that pension investors have to take a long-term view."

Data collected at the end of February 2010 shows projected retirement incomes for typical DC pension investors as £20,460 for a 30 year old (£22,612 in September 2007), £11,589 for a 60 year old (£15,088 in September 2007), and £8,525 for a 65 year old (£11,304 in September 2007).

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