New research by Standard Life has revealed that a worrying three in every four people (75 per cent) are ignorant of how much they have saved in their pensions.

Perhaps even more alarmingly, the study found that as many as 79 per cent – four in every five – of those aged between 55 and 64 could not put a figure on their pension savings. This group is at the most crucial stage of planning for retirement as they start to look at their options for life after work, yet they do not have a clue about how much they have saved.

Standard Life’s research also highlighted that women are less likely to have a handle on the amounts they have saved – 81 per cent cannot put a number to it, compared with 68 per cent of men.

There is, however, greater awareness of how much income will be needed in retirement, with respondents across all age groups and of each sex identifying a number greater than the Pensions and Lifetime Savings Association’s minimum standard of living threshold. However, women estimated considerably less than men – £22,428 against £32,617.

Even if they do not know how much has been saved to date, income makes a huge difference to ambition. Individuals earning less than £30,000 targeted £139,428, compared with £309,755 for those earning between £40,000 and £49,999. Those earning more than £50,000 said they wanted to save £821,880 – roughly £682,000 more than those on the lowest incomes.

Topping up makes a difference

Standard Life are also advising savers to look hard at how much they are putting away each month pre-retirement, as topping up pension contributions by just 2% over the course of a career could lead to £108,000 more in retirement. The calculations show that even a small increase in monthly pension contributions can have an extremely significant impact over the course of a career, demonstrating the power of compound interest.

Standard Life managing director for customer Dean Butler said that given the responsibility people now have for their own pension savings, it is worrying that the majority cannot estimate their pot size – particularly those approaching or even in retirement now. “In order to plan your financial future, it’s vital to engage with your finances as early as possible.

“The best place to start is by checking what you currently have in your pension, and what this could equate to in retirement, and there are tools and calculators that can help with this. From there, you can see whether your current funds will provide the type of retirement lifestyle you want and, if not, you can make changes to improve your situation, such as increasing regular contributions or paying in a lump sum.

“You may need to make lifestyle changes to accommodate this, such as cutting back on everyday spending, so it’s important to take a holistic view of your finances to see what’s possible in both the short and long term.”

Wishful thinking

Standard Life’s study is the latest in a series of surveys that demonstrate a disturbing lack of understanding among those about to enter into retirement. The Wisdom Council’s “The great retirement study” discovered very little planning and a high degree of wishful thinking among the 2,000 55 to 75-year-olds it covered.

Fewer than one in five were very or extremely confident they will have enough money for a comfortable lifestyle in retirement. Almost one-third (30 per cent) were either not at all confident or not very confident, while one in three expect the state pension to make up most of their income.

There was also a huge mismatch between anticipated spending and earning, with very few having taken professional advice.

Moreover, although half were prepared to pay for a pre-retirement review of their finances, they were not prepared to pay for it. The average they were prepared to pay was just £213, far below the £3,000 average cost of an adviser offering at-retirement advice on a £250,000 pension pot, according to unbiased.co.uk.

Retiring types

Hardly surprisingly more and more people are planning to work beyond current state pension age as they seek financial security for retirement, Standard Life research finds

• Older adults (aged 45-64) expect to retire at the age of 68
• Current retirees retired at 61, on average, citing health and feeling happy to stop working as main influencing factors

On average, those currently aged between 45 and 64 say they would like to retire at 68 – two years later than the current state pension age.

This is likely due to the desire to have the time to build a solid pot to fund the duration of their retirement, as more than two in five (44%) say the biggest influence on when they’ll retire is their level of financial security. This consideration comes ahead of health and wellbeing (41%) and being happy to stop working (30%).

The findings, contained in Standard Life’s Retirement Voice study, reveal that people are planning to retire at a much later age than those who are currently retired, which may be due to the responsibility for funding retirement now shifting to individuals.

Keeping tabs on your retirement finances

Remember that you can use your RetireEasy LifePlan to make sure your retirement plans are realistic and sustainable.  If your subscription has lapsed, you can renew it for just a few pounds a month.