An average DC pension scheme has lost over £10,000 per annum since 2000, according to the Alexander Forbes National Pension Index, launched this week. An average British private sector worker would therefore need to save 33% of salary to make up the shortfall, as the March 2011 index value stands at 67.6, down from a base of 100 at the start of the millennium.

In 2000, for a 30 year old, contributions of 12% of salary were expected to provide a two-thirds income in retirement at age 65, while these same contributions would now only provide an income of 45% of final salary.

To get back on track, the typical investor (now 41 years of age) would be required to invest 33% of final salary. However, Office for National Statistics data shows that the average total contribution is just 8% of salary.

Alexander Forbes’ new index aims to make people aware of their DC pension savings and will be updated and published every six months in March and September.

For any given member, the index tracks the progression of the DC fund against expectations and takes into account changes in market annuity rates. The index can be used for the DC market as a whole, for a specific pension scheme or for individual members.

Steve Watson, head of DC at Alexander Forbes Consultants and Actuaries, said: “We want people to wake up to the pension crisis in the UK. There is lots of media coverage about lack of pension savings, but to date few people really understand what it means to them in hard cash. The Alexander Forbes National Pension Index aims to show the man in the street with a DC workplace pension where they actually stand. It’s vital that people begin to understand the figures or we’ll have a whole generation retiring on a fraction of their working salaries.”

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