Pensions plunge set for the Midlands
The value of the pensions of Midlands employees could drop by up to 20 per cent, according to PwC.
The firm said many defined contribution pension pots are invested in investment structures geared towards target retirement ages no longer suitable for today's workers.
It said this usually involves investing in higher volatility "return-seeking" assets and switched into cash bonds in the five to ten years before anticipated retirement as part of "lifestyle" investment structures.
Jeremy May, human resources expert at PwC in the Midlands, said: "These 'lifestyle' investment structures are useful for those people who have predictable retirement horizons. But such structures will become less satisfactory as we see increasing diversity and unpredictability in retirement timings.
"There's a real danger that, under existing 'lifestyle' default structures, investments will be switched to low-growth assets too soon and people could lose the opportunities for valuable higher returns. Given that many of today's workers are already likely to have inadequate retirement savings, any threat to pension pots is a big concern."
PwC calculates that a scheme's member who delays using his or her pension pot for five years beyond the date for which their scheme’s lifestyle structure has been targeted, could face a pension pot that is 22 per cent lower than otherwise.
