There is a wide discrepancy between people's retirement financial expectations and their likely final pension incomes, research from Retirement Review and iPipeline has found.

The research, which was shared as part of the group's report, Building a Better Retirement: the state of the nation’s financial future, showed that people are targeting a final pension pot of £223,000 on average and an income of £25,679 a year. The average age that people expect to retire at is 64.9.

Ipipeline product strategy director, Paul Yates, said that this shows "a clear disconnect" between what people want and need in retirement versus what they are likely to receive.

"If they are targeting a pot of £223,000 on average and an income of £25,679 a year, those two figures don’t appear to correlate when we consider an average retirement age of 64.9," Yates continued.

"A pot significantly larger would be needed to achieve that income throughout their lifetime, even when we include a full State Pension."

After questioning 3,000 UK adults aged between 44-66 years in June 2023, Retirement Review and iPipeline also found that the total average value of personal pension pots across all schemes is £167,891.

Meanwhile, 12 percent of respondents were targeting a pension pot of £50,000 or less, while 37 percent have no target at all. 19 percent of survey participants think they may never be able to retire.

The estimate for personal annual income in retirement based on current pension pots is £19,665 (as opposed to the target averages at £25,679).

After "not sure", at 37 percent, the largest response to the question of estimated personal annual income was less than £10,000 at 18 percent. This is concerning, the report said, as the Pensions and Lifetime Savings Association (PLSA) suggests £12,800 as the minimum level of annual income needed in retirement.

One adviser quoted in the report, Financial Life Planning directors, Kate Shaw, said the majority of target pots discovered by the study are "really low". "They should all be up at the £250.000 to £300,000 level, especially if it’s just one person," Shaw added.

On the fact that reasonable percentages of respondents felt that an annual income below £10,000 could be sufficient for comfort, John Lappin, the editor of the report, writes that the reality is that a sizeable proportion of this income would be required to pay for energy bills alone.

"So, is this just another example of a lack of reality or realism in planning? Is this realism that the advice sector can help bring to more people?” he asked in the report.

The research also looked at why people are saving, with over half (53 per cent) saying a priority in retirement was to maintain a pre-retirement lifestyle, followed by a third (34 per cent) saying it is to travel.

Almost a quarter (23 per cent) stated that is it a priority to protect inheritance for loved ones. The same proportion (23 per cent) said a priority was to meet the potential costs of long-term care.

In addition to consumer research, the study questioned a number of advisers and providers. Retirement Review’s Kevin Carr said advisers are clearly concerned about provider service levels, while the latter were positive about the effect that auto-enrolment has made but say it needs to be scaled up.

"The Mansion House reforms were felt to be addressing economic investment issues not retirement outcomes," he added.

"Both advisers and providers expressed frustration at the constant barrage of regulatory changes and lack of long term planning. There is a need to come together as an industry to find solutions or else the UK’s retirement future will be driven by politics and short-term planning.”

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