Pensions: Over-50s Have 'No Idea' Of Payout
The over-50s are overestimating how well off they will be when they retire - with many having no idea about their expected income, according to new research.
The Institute for Fiscal Studies (IFS) said those in their 50s "find it impossible even to hazard a guess" as to the amount of income their pensions will pay out in its report.
Savers between the ages of 50 and 64 with a defined contribution (DC) pension would, on average, have to grow their pension pot by 77% - or £20,200 - to reach their expected income, it said.
One in four would have to add £60,000 to their pension pot before retirement to meet their retirement expectations, and a third of those questioned could not even offer a rough estimate of their retirement income.
The research also warned that people are underestimating how long they will live when compared to national projections - a factor crucial to pension planning.
Women undershoot their life expectancy by four years - estimating an age of 84 instead of 88 - and men stating 83 instead of 85.
And almost 60% have not given any thought to how many years of retirement they might need to finance.
The National Association of Pension Funds (NAPF), which funded the report, said that given the current climate of very low annuity rates, many are likely to feel short-changed when they retire.
Its chief executive, Joanne Segars, said that although it is fortunate that people are living longer, they need to plan for it.
"It's worrying that so many over-50s are sleepwalking into their old age and are expecting to be better off than they will be," she said.
"The average saver with a defined contribution pension is being over-optimistic."
She stressed that it is essential to "give your workplace pension a regular health check".
"It is not too late for the over-50s to take some control of their retirement plans by adjusting the amount they save, or how long they are prepared to work for," she added.
Annuity rates, which determine what annual income is received from a given pot of money, vary widely, the IFS highlighted.
But it revealed that over the last decade, more than 70% of people purchased their annuity from the company that provided their pension.
The NAPF's head of research, Mel Duffield, added: "These new findings show that those approaching retirement are at real risk of disappointment if they are unrealistic about how long they are going to live and how much their pension pot will pay out when they come to convert it into an annuity.
"We know it is a very tough annuity market out there with gilt yields so low, but this is likely to be exacerbated by savers not realising how far their defined contribution pension will need to stretch."