The average pension pot of £253,701 would only last 11 years against the average desired annual retirement income of £30,050, research from Retirement Review has revealed, highlighting a gap between savings reality and income expectations.

The report showed that the average age UK consumers expected to retire was 65.7 years, and their average personal target for their retirement pension pot is £253,701.40, which would provide a target income of £30,050.20 for 11 years.

Alternatively, an annuity would provide an individual an income of £19,391 per year, assuming no lump sum taken and a moderate portfolio with ‘middling’ growth.

This figure is 35 per cent below expectations, although once an individual reaches state pension age, this will increase by £11,973 per year based on current entitlements, assuming they fully qualify.

Retirement Review emphasised that these figures highlight the value of ensuring savers have the right number of qualifying years in their state pension.

The report also highlighted uncertainty from a large minority on what to think about their future retirement, with one-third of consumers suggesting they were unsure of their current pension pot size and their target savings for retirement.

Meanwhile, 6 per cent said they expect to retire before 60 and 19 per cent are unsure if they will ever retire.

However, respondents admitted that with the right guidance, they believe they could retire earlier, with the number of people who think they could retire before the age of 65 increasing from 21 per cent to 28 per cent if they have financial planning.

The report also identified a knowledge gap on annuities, with 20 per cent claiming they had never heard of them and 10 per cent saying they know a lot about annuities.

Less than half of UK consumers said they would expect to be offered an annuity in retirement.

Yet, over a third (37 per cent) of respondents were positive about the value of annuities, 32 per cent were negative, and 31 per cent said they didn’t know.

When asked for their views on the value of annuities in five years, 40 per cent of respondents said they were unsure and both positive and negative sentiment fell.
However, respondents were certain they did not trust the government for retirement advice or guidance, as the government received the lowest trust score of 43 per cent and the highest level of distrust (47 per cent).

In contrast, financial advisers were the most trusted professional source for retirement, with 69 per cent claiming they trusted financial advisers.

Meanwhile, for those who have frequent contact with their adviser, trust levels rose significantly to 88 per cent.

Pension providers ranked closely behind financial advisers, as 68 per cent of respondents said they trust them.

Retirement Review said that the “strong” trust scores for advisers and providers were “encouraging” for those aiming to deliver effective, targeted support in retirement planning.

However, the group ranked highest based on trust in them to provide retirement guidance was family (70 per cent), followed by friends (61 per cent).

The report also underscored how inheritance tax changes and the rising cost of living are having a knock-on effect on pension behaviours.

Almost two-thirds (62 per cent) of respondents said they want to keep the government’s triple lock in place now, but 18 per cent said they would support removing it in the next decade.

Among those with self-invested personal pensions or defined contribution (DC) workplace pensions, up to 20 per cent said they may draw down funds earlier or contribute less because of planned reforms, raising concerns over pension adequacy and long-term income.

Additionally, 36 per cent of consumers with more than one pension pot say they are likely to consolidate their pensions.

Retirement Review and Carr Consulting & Communications director, Matthew Morris, said the report showed that consumer sentiment towards retirement and the pensions industry is one of “disinterest and uncertainty”.

“They are badly underestimating the amount they need to save in order to achieve the retirement they want and unsurprisingly lack sufficient knowledge on products like annuities to make an informed decision,” Morris said.

“They don’t have a negative perception of the pensions sector so there does appear to be a big opportunity for advisers and providers to make a concerted push to help to educate the public.”

Standard Life retirement savings director, Mike Ambery, added that the report is “an important review” of the current state of play in today's evolving retirement landscape where individuals face several challenges, including the need to maximise savings during their working life - a key focus for the UK government due to widespread under-saving.

“With more people retiring with DC pensions, they face risks that previous generations with defined benefit (DB) pensions did not,” he continued.

In this context, he said it was "welcome" to see how annuities are regaining their place as a "core part of a balanced retirement strategy" and increased recognition of the security offered by a guaranteed income as part of a mix solutions.  

“We know income certainty is important to 98 per cent of over-50s when thinking about their pension and looking forward, we expect the decision to become when to annuitise as people look to secure not only income security, but ways to combine this with solutions that allow for a level of growth and discretionary spending during their retirement," he said

“Advisers have a key role to play in this, ensuring clients have a secure and reliable income during retirement that also allows for an element of flexibility when it comes to how people want to manage their money in later life, and providers are responding to this, with innovative solutions already being brought to market.”

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