Pension planning 'inadequate' among over 50s
- 30 November 2012
- From the section Business
Many over 50s are "sleepwalking into their old age", a pensions group says, as research suggests people are over-optimistic about retirement income.
The National Association of Pension Funds (NAPF) said people must conduct a healthcheck of their workplace pension.
This view comes after an Institute for Fiscal Studies report said that people may live for longer than they expected.
The report suggested that people's pension provisions were inadequate compared with their expectations.
The report, which was partially funded by the NAPF, claimed that women were underestimating their life expectancy by four years, and men by two years.
It found that one in four people aged between 50 and 64 needed to save an additional £60,000 before retirement to gain the income that they might expect.
Nearly 60% said they had not thought about the number of years of retirement that they might need to finance.
About 32% of those aged 52 to 64 could not offer a rough estimate of what their private pension retirement income might be.
"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," said Joanne Segars, chief executive of the NAPF.
"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."
She urged people to shop around for an annuity - a pension income for the rest of their life - which is bought with their pension pot.
"It does not help that the annuity market has become so tough," she added.
There has been a consistent fall in annuity rates since 2007.
Tom McPhail, head of pensions research at investment firm Hargreaves Lansdown, said: "Generally investors underestimate their life expectancy in retirement and, in order to receive the income they would like, investors need substantially more money in their pensions."
This meant better communication was needed to manage pension investors' expectations. They also needed to be encouraged to take better decisions about retirement saving earlier in their working lives, he added.