The size of pension pot needed to provide a man with an annual retirement income of £5,000 has increased by nearly a third since late 2009, official figures published today have revealed.
Data issued by the Office for National Statistics in the 2013 version of its Pensions trends chapter 10: saving for retirement reportshows that a man retiring aged 65 in December 2009 would have needed £118,000 in savings to purchase a £5,000-a-year retirement income. A woman in the same situation would have needed £133,500.
However, by March 2013, the amount needed to receive this level of income had increased to £152,800, based on the gender-neutral annuity rates that have been offered since December 2012 as a result of changes in European law.
For men, this represents a 29% increase in savings requirement, while for women, who previously had to pay more for annuities because of their longer life expectancy, the savings requirements has increased by 14%.
Tom McPhail, head of pensions research at consultancy Hargreaves Lansdown, said that, with annuity rates at an all-time low, the figures provided further evidence that peoples' expectations of their retirement incomes were increasingly likely to be over-optimistic.
'There is a risk that because people haven't saved enough they will look to maximise their income today, at the expense of inflation proofing and death benefits for their spouse tomorrow,' he said.
'It is vital that retiring DC investors shop around for the best possible terms, seeking out an enhanced annuity where they can, and considering the most appropriate shape of annuity for themselves and their dependents.'
The ONS figures published today also indicate that, between 2008 and 2010, pension saving represented 79% of the total aggregate saving of households headed by someone aged between 50 and 64.
However, the total savings of the wealthiest 10% of this group - which also includes property and financial savings - were around eight times as much as the total savings of bottom 50% combined.
Malcolm McLean, consultant at Barnett Waddingham, said this confirmed the big disparity between the 'haves' and 'have-nots' in terms of pensions saving ratios.
He also highlighted the gap between defined benefit and defined contribution savings outlined by today's report. In 2008/10, median DB pension saving was £177,900, but for DC it was just £29,000 on average.