Consumers are underestimating how long they’ll live and could end up facing an £80,000 shortfall in retirement savings. Research from Scottish Widows reveals that one in five people (19%) base their own life expectancy on the age to which their grandparents lived – despite lifespans increasing by 11 years across three generations.

The average life expectancy of UK adults saving for retirement is 87 years, yet the average adult expects to live until 82 and retire at 65. That means a typical retirement is actually 30% longer than people expect, at 22 years. Those five additional years will require an extra £80,000 in pension savings – meaning they’d have to have put aside £340,000 during their working life.*

Despite this shortfall, one in 10 (10%) over-50s doesn’t know how they will fund their income and 28% fear running out of money in retirement.

These out-of-date assumptions about life expectancy are putting people’s retirement plans at risk. Amongst over-50s who are not retired and do not have a Defined Benefit pension, only 9% plan to buy a product that provides a secure income for life, such as an annuity**.

This could be down to a lack of knowledge, as one in eight (13%) in this age group (who don’t plan to buy an annuity) don’t know which products offer an income for life.

Emma Watkins, Annuities Director at Scottish Widows, said: “Life expectancy has grown substantially in the last 60 years and now one in 10 people will live to be 100. As the concept of the three-stage life is becoming out of date, people facing into retirement are also facing a trade-off between saving more, working longer or having a clearer plan.”

“Many people underestimate their life expectancy and when faced with the reality that they will live longer than they think; 12% of people over 50 expect to work longer, 15% say they’ll have to budget their retirement savings better, and 9% say they’ll need to put more aside than they originally thought.”

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