A new study claims that up to a third of over-50s are ‘sleepwalking into retirement’, with no idea of what their pension income might be.
The study highlights two alarming facts about pensions savers: most have no idea how much their pension is likely to pay out, and second, many underestimate how long they will live and, therefore, how long their pension has to last.
The study concluded that savers aged from 54 and 60 in defined contribution pensions “will need to increase their current pension pots by 77%” to reach their expected levels of income.
Given that this would be an almost impossible task, the conclusion has to be that we face a generation living far short of their expected lifestyles, with many unable to give up work for financial reasons – or, at worst, the rise of ‘pensioner poverty’ among those who did not save enough to live on.
The report showed that, among people in the 52 to 64 age group, for whom some knowledge of the value of their pension pot is crucial as they coast towards retirement, a third could not offer even a rough estimate of what the income from their pension might be.
As for the longevity issue, the IFS study concluded that women tend to underestimate their life expectancy of 89 years by about 4 years, while men underestimate their life expectancy of 86 years by 2 years.
The study was written by the Institute of Fiscal Studies (IFS) together with the National Association of Pension Funds (NAPF).