The firm’s DC Pension Tracker, which measures the value of 3.7 million pension accounts, rose from a total of £368bn at the end of February to £391bn at the end of March, due to rises on global indices.
But the Bank of England’s attempt to stimulate the economy with a policy known as quantitative easing involves buying gilts, pushing up prices and reducing their yields. This has hit annuity rates, which are calculated using gilt yields.
A worker retiring now could expect a reduction in their pension income of 4% compared with a year ago.
A pension fund of £100,000 could have bought an annuity providing an annual income of £7,519 at the end of February, which fell to £7,209 after quantitative easing began.
Helen Dowsey, principal at Aon, said people approaching retirement had difficult choices to make.
“They can either use the open market option to buy their annuity now and take the hit on a lower income, or consider other options such as income drawdown or deferring retirement in the hope that annuity rates will improve in the near future.”
She said that predicting when annuity rates would improve required a very good “crystal ball”.
“It can prove difficult for most people to time their retirement to coincide with opportunities in which they are likely to obtain better rates; most of us retire when we have to rather than when we want to.”
The Bank of England is on target to buy £75bn of assets by early June and has already bought £31.5bn of gilts, £500m of corporate bonds and £2.4bn of commercial paper, which is a type of short-term debt.
