Savers to be told pensions 'truth'

Savers will get an estimate of pension income

Pension savers will be able to discover how near they are to enjoying a prosperous retirement under plans being unveiled by the government.

Parliament will on Monday be told of measures which will force fund managers to give policyholders a "realistic idea of the spending power of their pension".

The reforms follow concerns that savers are not being given a full picture of their retirement income.

"Anyone paying into a pension scheme should have a reasonable idea of the level of pension they might receive when they retire," Pensions Minister Ian McCartney said.

Fund assessment

Under current regulations, statements issued to savers with a personal or stakeholder pension, or money purchase occupational pension, reveal only how much cash has been invested, the value of the fund, and the total fees charged.

The rules outlined on Monday, and to come into force next April, will oblige pensions providers to include an estimate of the value of funds at retirement, and the income this is likely to give.

Inflation will have to be taken into account, to allow savers to judge the likely standard of living in retirement.

"People will be able to see what the real spending power of their pension might be," Mr McCartney said.

"People can plan more sensible for their retirement with this kind of information."

Worrying figures

The shake-up has been welcomed as a "wake-up call" by the Faculty and Institute of Actuaries, which helped devise the new procedure.

But some observers fear that Britons will react with apathy to yet further concerns about pensions, and the realisation that saving may yielded far lower rewards than had been thought.

Figures quoted by online news firm Citywire said that a 21-year-old contributing £20 a month, and retiring at 60, could receive an income of £645 a year in today's money.

This figure assumed that savings grew at 7% a year, with inflation rising by 2.5%, giving net annual growth of 4.5%.