LONDON (Reuters) - Britain’s over-50s are in blissful ignorance of how little their pension pots will pay out and need an urgent financial health check if their retirements are to be as comfortable as they expect, an industry report said.
Workers approaching retirement in the next 15 years need to see their pension pots grow by almost 80 percent to meet their expectations, the National Association of Pension Funds (NAPF) said on Friday.
“Millions of people are within a decade of their state pension but have still not thought about how long their retirement might last,” Joanne Segars, chief executive of the NAPF, said in a statement.
The burden of managing a pension at retirement has increasingly fallen on employees, as defined contribution (DC) pensions, rather than final-salary schemes, become the more dominant form of retirement saving.
The introduction of the government-backed auto-enrolment scheme - where people are required to opt out rather than opt into retirement saving - could lead up to 8 million additional workers being signed up for pensions, which will likely be DC pension memberships.
Yet a third of workers aged 52 to 64 remain ignorant about what their private pension income may provide in retirement, while 59 percent of workers have never thought about how many years of retirement they need to finance, a report by the Institute for Fiscal Studies and supported by the NAPF said.
Women in their 50s are living to an average of 88 - four years longer than expected - while men are living to 85, overshooting life expectancy by around two years, when compared with national projections of life expectancy, the report said.
Annuities, which many British retirees buy to ensure a steady income, are meanwhile becoming more expensive, meaning people will expect their savings pots to generate a higher annuity income than it actually does.
Private pension firms have also been accused of failing to disclose some of the costs they levy on customers’ investment funds, leaving people unaware that their pension savings were being eroded by the charges.
The NAPF represents 1,300 pension schemes in the UK with 16 million members and assets of around 900 billion pounds.
Reporting by Sarah Mortimer; Editing by David Holmes