Seven in ten over-40s are underestimating the full State Pension amount by around £1,460 a year. That’s according to research from specialist UK financial services group Just Group.
Sharing its latest findings, Just Group claims that around 25% of over-40s believe that the 2017/18 UK State Pension is around £6,000-£6,288. However, in reality, it is worth £8,297. Those closest to retirement also undervalue the full State Pension by around £1,335.
However, even though pensioners in the UK will get more from the government than they think, there is a stark warning when it comes to retirement planning.
Indeed, those aged 40-64 estimated their spending, if they were to retire today, would be £10,400 a year. And this corresponds with research by the Joseph Rowntree Foundation which suggests that the bare minimum needed for an adequate retirement is £10,187 a year. As such, without independent and professional guidance in the run-up to retirement, many people are going to struggle.
Commenting on the research, Stephen Lowe, group communications director at Just Group, said: “We are in an environment where people are expected to take a large amount of responsibility for their own pension decisions.
“That is going to be very difficult unless people first understand what their likely outgoings could be and then have a more accurate expectation of how much income they are going to receive from their various pension sources.
“At the moment many people don’t seem to have a realistic target of the income they will need in retirement. If their aim is to reach the Minimum Income Standards they are going to have a far poorer retirement than they probably bargained for.
“The Financial Conduct Authority asked those thinking of taking pension benefits from defined contribution pots how much income those pensions would produce and fewer than half of 55-64 years said they had a good idea.
“The regulator has dubbed taking pension cash early ‘the new norm’. Now that people have greater choice about how to use pension savings, it is important the norm becomes taking independent and impartial guidance to ensure they are on track towards a reasonable income before thinking of accessing cash lump sums early.
“There’s no point being pleasantly surprised by a few extra pounds of State Pension every year when your total income leaves you struggling to pay the bills.”
