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Are you ‘sleepwalking’ into old age?
06.12.2012

A new report, from the Institute for Fiscal Studies (IFS), claims a quarter of the over 50’s could be ‘sleepwalking their pensions’ into old age.

Nearly 60% said they had not thought about the number of years of retirement that they might need to finance. Many were over-optimistic in estimating their projected retirement income. In reality most pension provisions were found to be inadequate compared to individuals expectations.

The National Association of Pension Funds (NAPF), stated that given the current climate of very low annuity rates, many are likely to feel short-changed when they retire, “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 ( partially funding the report).”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.”

Pensions, that would have been originated a number of years ago, were using what are now, out of date calculations to estimate individual pension requirements and  underestimating life expectancy. 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. Women underestimate their life expectancy by four years – estimating an age of 84 instead of 88 – and men stating 83 instead of 85.

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.”

The report calculated that one in four may have to add at least £60,000 to their pension pot before retirement, in order to meet their retirement expectations.

Conduct a health check on your finances now and investigate better more efficient ways of investing for your future, please contact one of our financial advisors or download our free brochure.


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