"At the moment many people don’t seem to have a realistic target of the income they will need in retirement."
Seven in 10 over-40s underestimated the amount of the full State Pension, with around a quarter guessing it was worth £6,000-£6,288 a year compared to the actual level of £8,297 in 2017/18.
On average those aged 40-64 underestimated the amount by £1,461 a year with those closest to State Pension age underestimating by £1,335.
Those aged 40-64 estimated their spending, if they were to retire today, would be £10,400 a year with the youngest group guessing £11,213 and the older group £9,849.
That compares to recent figures published by the Joseph Rowntree Foundation that suggested the Minimum Income Standard – the bare minimum needed for an adequate retirement – of £10,187 a year.
According to Just Group, this reinforces calls for independent and impartial guidance to be offered to people in the run-up to retirement.
Stephen Lowe, group communications director at Just Group, said: “We are in an environment where people are expected to take a large amount of responsibility for their own pension decisions.
“That is going to be very difficult unless people first understand what their likely outgoings could be and then have a more accurate expectation of how much income they are going to receive from their various pension sources.
“At the moment many people don’t seem to have a realistic target of the income they will need in retirement. If their aim is to reach the Minimum Income Standards they are going to have a far poorer retirement than they probably bargained for.
“The Financial Conduct Authority asked those thinking of taking pension benefits from defined contribution pots how much income those pensions would produce and fewer than half of 55-64 years said they had a good idea.
“The regulator has dubbed taking pension cash early ‘the new norm’. Now that people have greater choice about how to use pension savings, it is important the norm becomes taking independent and impartial guidance to ensure they are on track towards a reasonable income before thinking of accessing cash lump sums early.
“There’s no point being pleasantly surprised by a few extra pounds of State Pension every year when your total income leaves you struggling to pay the bills.”
