The majority of people will face a pension shortfall running into thousands of pounds each year because we’re drastically underestimating how much we need to save to live comfortably in old age, as study has shown.
The average income people expect after giving up work is £12,590 per year - but savings and investments will cover just 29 per cent of that, creating a shortfall of almost £9,000 a year, according to the latest pensions report from Aviva.
Even those who say they are fit to retire will encounter a shortfall, with the investments covering just over half of their future income.
The majority of us are relying on a state pension to top up our savings, but that will still leave us just over £2,000 short from our target retirement income.
To plug the shortfall, over-45s need to add an additional £42,000 to their pension pot before retiring at 67 - or around £107 a month. Even for those aged over 55, saving an extra £223 would help them reach that goal.
“It is very easy for people to underestimate how long retirement pots needs to last, and it takes a careful balancing act to plan for the future as well as enjoying the here-and-now," said Aviva retirement solutions managing director Clive Bolton.
"Care costs are often the great unknown, but making efforts to grow their savings pots will leave people in a better position to cope if this need arises.”