Pension panic as Britons risk retirement shortfall due to 'dangerously underestimating' amount needed to live

In a survey of 1,000 working-age UK adults, 23 per cent of respondents admitted they were unsure of the total pension pot size required to achieve their desired retirement income.

Following this, the next most common response was "less than £150,000" at 15 per cent.

According to the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards, £150,000 will only fund a "minimum" retirement standard for around a decade.

This is defined as covering all basic needs but only allowing a small amount of room for extra expenses or activities.

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As such, millions of savers may be underestimating the true cost of retirement and are at risk of a pension shortfall, according to PensionBee.

This is due to the average retirement lasts approximately 15 years, assuming retirement begins at 66and life expectancy reaches 81.

Some 49 per cent of respondents estimated they would need a total pot of around £250,000 or more, which would be necessary to sustain a basic retirement, longer than the 15-year average.

Overall, polling suggested there was a lack of agreement among Britons regarding the desired annual income in retirement.

The top three responses believed an annual income of £15,000 to £30,000, which includes the state pension if eligible and other benefits and income from savings or investments.

While this is in line with the average salary in the UK, it falls short of the PLSA’s "moderate" standard, in which retirees would see their annual food and clothing budget increase.

Some 15 per cent of respondents indicated a desired income of over £45,000 a year which goes over the PLSA’s "comfortable" standard.

Becky O’Connor, the director of Public Affairs at PensionBee, urged those thinking about their retirement to take action as soon as possible.

She explained: "It’s hard to plan for retirement without an idea of how much you might need, yet most Brits seem to be unaware of - or worse, dangerously underestimate - the true cost of retirement.

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"A good pension pot is one that can provide enough money for the duration of retirement. As this exact amount will vary based on individual circumstances, pension calculators can be a helpful tool in setting financial goals and adjusting behaviours to achieve them.

"However, one rule is broadly true: the earlier individuals start paying into a pension, the more likely they are to be able to afford their desired lifestyle, as their pension has longer to grow and the amount they’re required to save each month reduces.

"Consolidating old pensions into one easy-to-manage plan can also simplify the retirement planning process, by providing greater visibility, to make it easier to stay on track for later life."

Britons can see how much they saved for retirement by using PensionBee's pension calculator.