Higher earners are routinely overestimating their retirement income, with some misguidedly believing they'll see no drop in their earnings, research by Investec Wealth & Investment has found.
On average, those earning £50,000 a year or more estimate that they'll receive just less than half (44 per cent) of their current salary throughout their retirement from their private pension when, in reality, the amount they'll receive is more likely to be closer to a third.
Some big earners are even more optimistic, with around a quarter (26 per cent) of those surveyed predicting they would be pocketing more than half their current salary, while a particularly upbeat seven per cent thought they would be matching their current pay packet.
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"Unfortunately too many people overestimate how much income they will get in retirement," said Chris Aitken, head of financial planning at Investec Wealth & Investment. "We know from experience that higher earners tend to get around a third of their salary from private pensions, and this can be a shock for many of them."
When asked what they would do if they discovered their pension income was less than they'd hoped for, only a third (35 per cent) said they would cut back on their lifestyle and live within their means, while 15 per cent said they would carry on spending as they wished and risk running out of cash later on.
However, people plan to turn to other forms of investment to plug the gap. Just over half (54 per cent) said they would use money they have in a cash Isa, while 42 per cent will set their sights on stocks and shares and one in five (20 per cent) would bank on a buy to let investment.
Aitken continued: "The pensions landscape in the UK is a fast-evolving environment, and it is vital that people stay on top of developments – and the opportunities – to maximise the income they can get when they retire. It is more important than ever to develop a diversified financial plan as soon as possible to generate a suitable and sufficient income in retirement."