Research by Scottish Widows has highlighted how large numbers of clients are massively underestimating how long they might live for when they seek financial advice on their pensions.

A man celebrating his 65th birthday today can expect to live to 87, while a 65-year-old woman will, on average, live to age 89, according to data from the Institute and Faculty of Actuaries. Scottish Widows says that, even when a financial adviser informs them of their likely life expectancy, only 50% of clients then decide to increase their pension contributions.

The research also highlights the extent to which some people are failing to make sufficient provision for their retirement. Those who start saving for their retirement in their 20s should be applauded for doing so, yet the average pension saver in their 20s is on course for an annual pension income of £18,500 when the average person in this age group also says they want £25,000 per annum in their retirement.

Across all age groups, Scottish Widows’ The Future of Retirement report says that 38% of UK adults are ‘dis-engaged savers’, meaning that they are unaware of how much they are saving towards retirement. The firm says that people in this group will only receive an average of £13,000 per annum in retirement – this assumes that they are only making the minimum contribution to a workplace pension.

20% of those who receive annual income of between £10,000 and £20,000 believe they will never accumulate a pension pot big enough to allow them to retire.

Another aspect of the changing times referred to in the Scottish Widows report is the possibility that many people will never get on the housing ladder and will therefore need to pay rent in retirement, and so may have higher expenses than previous generations who may have been expected to own their own homes in retirement.

Self-employed individuals are not automatically enrolled into any contributory pension scheme and the report says that only 32% of self-employed people aged between 20 and 39 are saving enough, while 41% of this group are not making any pension provision.

The research was carried out online by YouGov Plc across a total of 5,036 adults aged 18+ during April 2019.

Pete Glancy, Head of Policy at Scottish Widows, said:

“Automatic enrolment is improving the retirement prospects for many, but those who fail to save beyond the default requirements of the scheme will be faced with a significant income gap. The first step in closing this gap is acknowledging the interlocking challenges faced by different groups, from the self-employed through to those who simply don’t know how much they are saving. We need to see reform for the self-employed on a par with automatic enrolment and the introduction of new minimum and default contribution levels to address the issue of the disengaged generation.”

The firm’s annuities director Emma Watkins said:

“Life expectancy has grown substantially in the last 60 years and now one in 10 people will live to be 100. We know this is creating new challenges for advisers, as they are having to help clients who could be vastly misjudging the costs of a longer retirement.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article