by business editor Trevor Sturgess

The last 10 years is a “lost decade” for pensions, with many people in the private sector facing a financially-stretched retirement.

That’s the claim by KPMG’s Gatwick office, which covers Kent.

It warns that in the coming years, more people will have to rely on savings, property and other assets rather than a pension scheme to see them through retirement.

In contrast to the public sector, private sector pensions have been hammered, with rising life expectancy and falling investment returns combining to condemn many to a less comfortable retirement. KPMG also blames the Government for failing to encourage saving for a pension.

Many companies have scrapped final salary pension schemes, leaving individuals contributing to other schemes with dismal returns. Many people are being forced to work longer than they had anticipated or hoped.

KPMG says that since 2000, the average pension scheme only managed to grow its assets by just over 2.25 per cent a year. Pension pot purchasing power slumped from a £100,000 fund being able to buy an annuity of around £9,000 at the beginning of 2000 to less than £7,000 today.

At the beginning of the decade, most companies assumed that a 65 year old would live - and receive a pension - for the next 16 years. That has now risen to 22 years – another six years of pension payments.

A pension scheme following a fairly typical investment strategy from January 1, 2000, to December 1, 2009, would have seen its investments grow at just 2.25 per cent a year. Returns (an average of 4.7 per cent) would have done better in a bank deposit account.

Linda Bell,Gatwick-based KPMG pensions director, said: “The decade from 2000 tells an unfortunate story in respect of equity markets spanning from the height of the dotcom boom to the current credit crisis.”

She says companies will want to deal with their “pensions hangover” from the last decade before moving forward with the next one.

“We expect to see more companies closing schemes before selling them to third parties. And individuals may well turn away from saving for pensions – burned by the experience of the last decade and also government policy to repeatedly reduce incentives to save.

“Over the next decade we predict that more and more people will retire relying on their capital, property or other assets rather than a pension scheme.

“This could be a very risky strategy as these people are likely to have a very difficult job running down their capital at the right pace to potentially see them through to age 100 and beyond.”