Over 50s too optimistic over pensions

| November 30, 2012
Over 50s too optimistic over pensions

A quarter of people aged between 50 and 64 years will need to save an extra £60,000 before they reach retirement age in order to receive the pension they expect.

A new report from the National Association of Pension Funds (NAPF) suggests that people are over-optimistic about their retirement income and many are “sleepwalking into their old age”.

NAPF is calling for people to check their expected retirement income.

Those coming up to retirement age may have to increase their expectations about how many years of retirement they will have, as a study by the Institute for Fiscal Studies suggests that people are under-estimating their life expectancy.

Woman are underestimating their life expectancy by four years, and men by two years, the study found.

Joanne Segars, chief executive of the NAPF said: “Fortunately, people are going to live longer than they think, but they are not planning for it, so they might find their savings and pension do not stretch far enough.

“Millions of people are within a decade of their state pension but have still not thought about how long their retirement might last.

“It is worrying that so many over 50s are sleepwalking into their old age and are expecting to be better off than they will be.”

The problem is exacerbated by the fall in annuity values in recent years and NAPF is advising people to shop around for the best deal.

A recent study by Age UK identified a high level of uncertainty about expected retirement income.

The organisation found that 28 per cent of people are unaware of how much state pension they will receive, and 25 per cent are unsure about the value of their private pension.

Almost a third said they do not have a private pension.

The government is expected to publish a White Paper on state pension reform following the Autumn Statement, which will outline a simpler, flat-rate state pension.

Age UK Charity Director General, Michelle Mitchell, said: ‘Radical reform of our eye-wateringly complex pensions system is long overdue.

“With such high levels of uncertainty about our financial future, it’s clear that a simpler system – which provides greater clarity for all and makes it easier for people to plan properly for retirement – is urgently needed.”

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