Analysis predicts average value will be worth just £2,400 a year by 2060
Britain is entering ‘a different world in pensions’ as the value of gold-plated retirement payouts to loyal workers goes into freefall, a Government minister warns today.
Official figures show the value of the average defined benefit pension, such as final salary schemes, will peak this year at £7,100 per annum.
But the Department for Work and Pensions analysis predicts this figure will fall every year for the next half century.
By 2060, the average value will be just £2,400 a year.
Steve Webb, the Pensions Minister, said: ‘It is clear that we are facing a different world in pensions.
‘A generation ago, employers provided final salary pensions and took on all the uncertainty. It was the perfect retirement solution for those lucky enough to have one.’
The golden age of pensions allowed millions to retire at the age of 55 or 60 on a gold-plated, inflation-proof income.
The collapse is fuelled by the fact that the number of private sector workers who will retire with this type of pension is plunging.
The vast majority of young private sector workers today do not even get a pension from their boss. If they do, it is highly unlikely to be a final salary scheme.
Just 10 per cent of firms in the private sector have a final salary pension scheme which still allows new recruits to join, and the number is falling rapidly.
The average value of contributions, by both the worker and the boss, into a defined benefit pension scheme is an impressive 27 per cent of salary.