Nearly half of UK adults underestimate how much income they may need for a comfortable retirement, according to new research. A survey commissioned by PensionBee found 47 per cent of UK adults believe a comfortable retirement would cost £30,000 a year or less.
However, the latest Retirement Living Standards from Pensions UK put the annual income needed for a comfortable retirement for a single person at £45,400 - at least £15,400 more.
Widespread lack of retirement planning
The research also found more than a third (38%) of people have no idea how much their desired retirement might cost, while just 16 per cent have worked out what they will need and feel confident they are on track to achieve it.
Despite the uncertainty, more than half (56%) said they feel hopeful or excited about retirement. Spending more time with family was the most popular retirement ambition, cited by 59 per cent, followed by travelling (55%) and having more time to rest (51%).
However, more than three quarters (77%) of those surveyed estimated the annual cost of a comfortable retirement at below £45,400.
Retirement Living Standards explained
The £45,400 Retirement Living Standards figure is designed to illustrate the annual expenditure a single person might need to achieve a 'comfortable' standard of living in retirement.
Pensions UK also puts the annual cost of a 'moderate' retirement for a single person at £32,700, which includes spending such as an annual overseas holiday and eating out a couple of times each month.
The full New State Pension is currently worth £12,548 a year, meaning workplace and private pensions, savings and other sources of income can play an important role in determining the lifestyle someone can afford after they stop working.
Pensions UK estimates only around nine per cent of the working population is currently on track to achieve its comfortable retirement standard.
Cost of living affecting retirement saving
The research suggests affordability is one of the biggest obstacles preventing people from preparing earlier for retirement. Among the 39 per cent who believe they have left their retirement planning too late, almost a third (32 per cent) said they simply could not afford to engage with their pension sooner.
That compares with 16 per cent who did not know where to start and 12 per cent who said pensions were too complicated. Separate Office for National Statistics figures cited by PensionBee show 35 per cent of adults believe they will be unable to save any money during the next 12 months.
Meanwhile, 56 per cent said their cost of living had increased during the previous month. The Pensions Commission has also warned millions of working-age people are not saving enough for retirement.
PensionBee's survey found 43 per cent of adults did not seriously start thinking about their pension until the age of 36 or later, while 26 per cent said nothing had yet made retirement feel real to them.
There were also differences between generations. Some 42 per cent of Gen Z respondents said they feel anxious or overwhelmed by retirement or try not to think about it, including 17 per cent who avoid thinking about the subject altogether. Gen X respondents were most likely to believe they had left retirement planning too late, at 48 per cent.
Maike Currie, VP Personal Finance at PensionBee, said: "Britons aren't short of retirement dreams. What they're short of is confidence that their finances will make those dreams a reality.
"For plenty of people, the barrier is money, not motivation. No amount of encouragement can fix a month that doesn't balance. When the choice feels like paying today's bills or funding a retirement decades away, today will win."
She added people who are in a position to take action could start by using a retirement calculator to estimate how much they may need and checking what pension savings they already have.
Currie said: "Turning a distant hope into something tangible that you can put a number on is a powerful first step. Once you know what you're aiming for, you can start making a plan to get there."
The findings are based on a survey of 1,000 UK adults carried out for PensionBee on August 13.
