Over 50s set to live longer but not prosper, says IFS
The over-50s are underestimating how long they will live and are over-optimistic about how well off they will be in their retirement, according to a report published today by the Institute for Fiscal Studies (IFS).
The report, supported by the National Association of Pension Funds (NAPF), found that:
- Women in their 50s are undershooting their life expectancy by around four years, predicting they will live to 84 instead of 88, while men are doing so by around two years (stating 83 instead of 85), when compared to national projections of life expectancy.
- Those approaching retirement (aged 50 to 64) with a 'defined contribution' (DC) pension are too optimistic about what their retirement income will be. On average their DC pension pot would have to grow by 77%, or £20,200, to reach their expected income.
- Of those aged 50 to 64, one in four would need to save more than £60,000 before retirement to attain the income they expect. And six out of 10 (59%) have never thought about how many years of retirement they might need to finance.
- A third (32%) of those aged 52 to 64 could not offer even a rough estimate of what their private pension income in retirement might be.
The report also showed how the over-50s are facing the blessing of rising longevity with the need to make adequate pensions provision, particularly when their pension is the DC type that is replacing final salary pensions in the private sector.
Joanne Segars, chief executive of the NAPF, said: "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.
"Millions of people are within a decade of their state pension but have still not thought about how long their retirement might last. It's worrying that so many over-50s are sleepwalking into their old age and are expecting to be better off than they will be. It does not help that the annuity market has become so tough.
"The average saver with a defined contribution pension is being over-optimistic. They need to see their pension pot grow by almost 80% to meet their expectations. That is a huge ask if they are only a few years away from their retirement party."
Segars added: "Over a third do not have even a rough idea of what their pensions might pay out. It is essential to give your workplace pension a regular health check, to see what it might deliver. It is not too late for the over-50s to take some control of their retirement plans by adjusting the amount they save, or how long they are prepared to work for."
The survey conducted in October 2012 surveyed over 1,000 UK employees