Millions of Brits are at risk of “dangerously underestimating” the amount of money they need in pension savings.
A survey, carried out by online pension provider PensionBee, found a significant number of Britons are unaware of how much they will eventually need to have saved in retirement.
This lack of knowledge increases the risk of Britons being forced out of retirement and back into work in their elderly years if they struggle to make their pension pot last.
The survey quizzed 1,000 working-age UK adults on their pension knowledge. It found that 23 percent of respondents admitted they were unsure of the total pension pot size required to achieve their desired retirement income. Another common response – from 15 percent of respondents – was “less than £150,000”.
According to the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards, £150,000 will only fund a “minimum” retirement standard for around a decade.
The minimum annual pension amount for a single person is defined as £14,400, according to the PLSA. This amount should cover all basic needs and leave only a small amount of room for extra expenses.
Most calculations assume the average retirement length as approximately 15 years, given that retirement age begins at 66 and life expectancy in the UK is around 81 years.
However, both the pension age and life expectancy are expected to rise in the coming years. The State Pension age for men and women is set to increase to 67 between 2026 and 2028.
Meanwhile, life expectancy for men in the UK remains at 78.6 years, while women on average live to 82.6 years. Surprisingly the life expectancy has fallen by 38 weeks for men and 23 weeks for women since 2019.
Around 49 percent of respondents believed they would need a total pot of around £250,000, which would be necessary to sustain a basic retirement that goes beyond the 15-year average.
Becky O’Connor, the director of Public Affairs at PensionBee, urged working-age Britons to start thinking about their retirement and take action as soon as possible.
She said: “It’s hard to plan for retirement without an idea of how much you might need, yet most Brits seem to be unaware of – or worse, dangerously underestimate – the true cost of retirement.
“However, one rule is broadly true: the earlier individuals start paying into a pension, the more likely they are to be able to afford their desired lifestyle, as their pension has longer to grow and the amount they’re required to save each month reduces.
“Consolidating old pensions into one easy-to-manage plan can also simplify the retirement planning process, by providing greater visibility, to make it easier to stay on track for later life.”
