Workers have unrealistic retirement expectations

People who are currently working have unrealistic expectations surrounding their retirement, according to research undertaken by Prudential. Young people are most often imagining retirement situations furthest from reality, expecting to retire much earlier than they will realistically be able to.

According to the research, workers of all age groups are confident that they will be able to afford to retire before they reach the age that they will receive a state pension. However, this age is increasing, and anyone born after April 5th 1978 will have to wait until they reach 68 to claim their state pension.

It seems that people are expecting to retire an average of four years before they reach state pension age, which among under 35s would be when they reach the age of 64. These unrealistic expectations are fuelled by an expectation that retirement incomes will be much higher. With the average retirement now lasting 20 years though, retirement funds are needed to last for a substantial amount of time.

Despite the fact that the proportion of people benefiting from generous final salary schemes is falling and will continue to do so, expectations of annual income after retirement is increasing year on year.

Stan Russell, a retirement income expert at Prudential, said: "It is encouraging to see people feeling so positive about the income they will receive in retirement. Many people look forward to giving up work and doing more of the things they enjoy. However, in a world where fewer people will benefit from generous final salary pensions, and everyone will have to wait longer to receive the state pension, making plans based on any false financial expectations may lead to problems later in life."