The average retirement income in the UK increased by 5.2% in the first quarter of 2017, and almost 15% over the last year, according to a report by Moneyfacts released today.
It shows that if someone had paid £100 a month into an average personal pension fund for 20 years, they would receive an annuity of £2,273 today, compared with £1,983 this time last year.
This signifies a 14.6% increase since the end of the first quarter of 2016, with incomes now at the highest level recorded since July 2014 thanks to strong recent pension fund returns, and generally higher annuity rates.
Moneyfacts head of pensions, Richard Eagling, said. "Pension schemes have placed even greater importance on the ability of funds to deliver strong performance if individuals are to generate an adequate retirement income."
This was reflected in 95% of all pension funds delivering positive growth in the first three months of 2017, with 6% of them posting double-digit growth.
The average retirement income in April 2016 and 2017, based on a gross monthly premium of £100 for 20 years, and on the average of all pension funds available, is shown below:
It is thought that the success of pension funds has been partly responsible for the record numbers saving into a personal pension; with the membership of defined contribution (DC) schemes recently over taking defined benefit ones.
However, this has led to concerns that the enthusiasm for DC schemes may diminish if the pension funds fail to continue their upward growth trajectory.
"The fact that the average pension fund has now delivered positive returns in every calendar year since 2012 has arguably made it easier for individuals to accept the investment risks inherent in the DC pension model than might otherwise have been the case," Eagling continued.
"Whether the recent enthusiasm for personal pensions and the low opt-out rates for auto-enrolment will continue should we see a sustained period of falling investment returns remains to be seen."
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