Two thirds (66%) of people grossly underestimate the value of their pension pots at retirement by close to £100,000, research by Foster Denovo has found.
The UK advice firm surveyed 2,000 people and found a severe disparity between consumer’s confidence and the reality of what their pensions would be worth.
According to the research, one third of consumers were not aware of the current value of their pensions and close to two thirds (64%) still believed they had enough to retire on.
When asked how much they thought they would need in retirement, the average response was £125,700.
Foster Denovo highlighted research by consumer publication Which? that suggested in order to earn £27,000 a year in retirement, a person would need £215,450 in their pension pot. For a more luxuirous retirement, it said they would need up to £502,775.
Foster Denovo partner and financial adviser Jamie Smith (pictured) said the survey highlighted the ongoing “pensions crisis” in the UK, given the large gap between how much consumers thought they would need to retire and how much they may end up with.
“What is more concerning however, is that despite this disparity, confidence of being on track is still very high,” he said.
“These figures would be worrying enough on their own, but in the current environment whereby savers are seeing their pension pots impacted by market volatility and record falls, it highlights that far more is needed to be done to educate savers.”
With 60% of people surveyed saying that running out of money is their biggest concern in retirement, Smith added it was “vital that people understand how much their pensions are worth to ensure they are able to retire comfortably, instead of living in the fear of running out of money”.
“Now is a particularly worrisome time for investors but despite the current volatility we are experiencing, it is important to not make knee jerk reactions, but instead follow the right advice and guidance to put in long-term plans to achieve realistic and properly informed goals,” he said.
“The good news is that it is never too late to improve your quality of life in retirement. However, the later you leave it, the more you will have to save each month so we would urge people to arm themselves with the right information and take formal advice where they can.”