A third of savers overestimate their pensions

When asked to guess, retirees guessed their pots could be £50,000 bigger than reality.

Almost a third of savers overestimate how much their state pension will provide in retirement.

A survey by the consumer watchdog Which? found future retirees overestimated how much income they would have in later life by as much as £50,000.

The full state pension is currently £175.20 per week, but the actual amount you get depends on your national insurance record.

Which? says the average is actually around £150 a week or £7,800 per year.

Just 29% knew or guessed this figure correctly.

Meanwhile, a quarter of savers thought that the figure was £175 a week or £9,100 a year.

While this is the full level of the new state pension, not everyone will get this.

Those covered under the old state pension receive £148 a week, on average, while people getting the new pension get a weekly average of £158.

One in 10 wrongly thought that the state pension is worth £200 a week, or £10,400 a year on average.

This means people may be overestimating the amount they will get from their state pension by as much as £49,400 over the average length of retirement, defined as from age 66 to 85.

The research also found that only 29% could correctly identify the current state pension age as 66.

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A third of respondents thought the state pension was 67, but this increase won’t happen until between 2026 and 2028.

Darren Cooke, financial planner for Red Circle, says most people actually underestimate their entitlement and also questioned the use of the average figure by Which? rather than the £175 which is the official amount.

He says: “Most people don’t have a clue how much their state pension will be but I can’t remember the last person I spoke to who overestimated it. In fact, the vast majority underestimate it.”

David Sinclair, director of the International Longevity Centre, says more government and industry education is needed to inform savers and retires.

He adds: “There is a significant risk that too many of us unprepared for financial shocks as we sleepwalk into retirement with an inadequate income.

“In getting more people into the long-term saving habit, auto-enrolment has been a big success. But too many of us are saving too little to give us a decent income in retirement.

 “A risk of auto-enrolment is that savers don’t feel the need to engage in decisions about their future retirement income and therefore may be complacent about their future prospects.”