British workers are trapped in a retirement cash crisis dreaming of an annual income that pension rules will not allow them to achieve, according to a new study.
Almost two-thirds consider they cannot take retirement when they wish, while only 7% of workers are on track to give up work when they planned.
The survey revealed 55% of workers have never checked how much they have in their pension pot, while 40% do not know how much they are contributing each month.
Yet many workers expect to have a retirement income that would take a pension fund of at least £1 million to support, says the UK Readiness Report by pension firm Aegon.
Savers in for a shock
The report explains that the average expected retirement age is 63 years old with an ideal annual income of £42,000 – up £7,000 or 20% from last year – even though this would need a pension worth more than the current lifetime allowance to generate this cash.
“The only reason most of these people feel confident about their retirement is because they do not know how much they are contributing and how much their pensions are worth. If they did they would have a shock,” said a spokesman for the firm.
Many workers seem to be pinning their retirement hopes on auto-enrolled workplace pensions.
However, only 59% know how much they and their employers are contributing, half have no idea how much their current pension is worth and a third do not know if they qualify for auto-enrolment.
Unaffordable aspirations
Despite this, 80% are relying on their workplace pension to fund a comfortable retirement.
A fifth plan to pay extra into their pension when minimum contributions rise to 5% of salary in 2018, while only 6% are considering leaving.
Aegon UK Direct managing director David Beattie said: “Pension rules may have changed a lot recently, but attitudes towards saving do not seem to have kept track.
“Now people have control of their savings, the industry has to focus on giving savers the chance of the retirement they really want by doing more to help them realise their aspirations.
“The problem is a big difference between their aspirations and what they can afford. To prove the point, few realise a retirement income of £42,000 a year is more than current pension rules will allow.”
