A large number of individuals have little idea about what they need to save or how much income they can expect from their pension savings, a survey has found.
According to Interactive Investor’s annual retirement survey, published today (October 12), people tend to be over optimistic when estimating their likely personal retirement income.
The research found that the average income of over-65s is £16,540 and £38,213 for the II community.
However, individuals expect that they will have an income of £21,730 come retirement, which is 30 per cent more than reality.
Younger savers hope to receive around £25,000 income, 50 per cent more than reality.
The survey revealed that six out of 10 (61 per cent) had no idea what their income will be in retirement and only one in 10 (11 per cent) know what money they will have coming in.
It noted that individuals became more realistic about incomes as they near retirement.
Interactive Investor chief executive Richard Wilson said: “We also see retirement outcomes being routinely compromised by just ‘not knowing’.
“Nearly one in four (24 per cent) of the general population say they know nothing about pensions. In a world of pension freedoms, and after ten years of auto-enrolment, this feels like policy failure.”
Source: The Great British Retirement Survey 2022, Interactive Investor
Meanwhile, the report revealed that around half of women (48 per cent) aged over 65 are dependent on the state as their only source of income, compared with 29 per cent of men.
Interactive Investor head of pensions and savings Becky O’Connor, said: “One worrying constant is that while savings are being cut back, often because there is no other option, people continue to overestimate their retirement income by an average of around 30 per cent.
“The danger is that the cost-of-living crisis leads us head on into a full-blown retirement crisis.
“With savings increasingly being cut to the bone, it’s crucial that where possible, people think carefully about how they balance medium and longer-term savings goals.”
Elsewhere, although income predictions varied, the research found that the average age people would like to retire is similar to the average age the current generation of pensioners retired – around 62.
People under 40 said they would like to retire at 59, but only 28 per cent of current 59/60-year-olds are already retired.
It found that most people have no target for retirement saving and nor did the current pensioners when they were younger as most (80 per cent) said they simply tried to save as much as possible.
Cost of living pain
The Interactive Investor survey found that the rising cost of living is now the UK’s top financial concern and a big worry for three in five (59 per cent) people.
Of those most concerned about the rising cost of living, 73 per cent said their financial situation impacts their mental health.
Overall, two in three people (65 per cent) feel that their financial situation impacts their mental health – rising to three in four (76 per cent) people in their 20s and 30s.