Pension warning: Britons need £1m in savings to have 'comfortable retirement'

Some 28 per cent of those with £250,000 in investible assets believed they would need less than £400,00 in their pension pot.

Most Britons polled (65 per cent), thought they will need between £200,000 and £800,000.

On average, respondents thought a pot of £536,000 would be needed, while those over 55 thought they’d need £661,650.

Despite these guesses, retirees will need savings of £1.1million to have a "comfortable" retirement, according to the Pension and Lifetime Savings Association.

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A pension pot worth £536,000 would actually only provide an annual income of £21,400 to those who have left the workforce.

In comparison, savings of £661,650 would give someone £26,500 a year, based on the PLSA's findings.

However, if someone has £1.1million saved excluding the state pension, they would have a yearly income coming in worth £43,000 which is deemed to be "comfortable".

Only four per cent of respondents admitted that they thought they would need more than £1m in their pension to get their dream retirement.

Mike Stimpson, a partner at Saltus, broke down what is at stake for the 96 per cent who are underestimating what they need to have saved.

He explained: “Our research highlights some important issues around expectation versus reality when it comes to wealth with a clear misunderstanding surrounding how much money is needed for a comfortable retirement.

“If anything, the perception gap between expectations of what will be needed and what is actually needed could get bigger as life expectancy continues to grow. Living to 100 could become commonplace, and the impact that will have on retirement planning would be huge.

“Labour’s plans to help boost individual’s retirement incomes by consolidating smaller pots and introducing a ‘value for money’ framework could, in theory, help address some of these issues, but in practice, the promise of an £11,000 ‘boost’ should be taken with a pinch of salt."

The actual pension savings of respondents is currently £484,000 on average but this jumps to to £546,000 for those aged 55 or over. These figures would provide someone with an income of £19,000 and £22,000 respectively. Both of these amounts are significantly below what someone needs to have saved in retirement.

While Stimpson noted how Labour's plans to bolster pensions will beneficial down the line, he warned that Britons should not expect to be awarded with an immediate boost their retirement savings.

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Notably, the pension expert cited that it will take years for an automatic pension system which consolidates pots to come together.

Stimpson added: "Secondly, the claim that these measures could deliver bigger pensions will ultimately depend on the performance of your investments, so cannot be seen as any kind of certainty, and thirdly, any kind of reform will have trouble making any real difference if people are not able to save into their pensions in the first place.

“Because, despite the fact that the majority of respondents are going to come up short in terms of what they’ll need for retirement, 13 per cent have already cut their contributions, and a further 15 per cent plan to reduce the amount they are putting aside for retirement over the next six months.

“The decision to cut pension contributions should not be taken lightly and it is always best to speak to a financial adviser to fully understand the implications this could have for your plans further down the line.”