Young workers seem to have an unrealistic expectation that they will live longer and have more money when they retire.
Even though they will have smaller pension funds and will have to wait until they are much older for the state pension, they still expect to give up work at a younger age, says research by financial firm Prudential.
Most workers are looking forward to retire at least four years ahead of their state pension age, but many seem unclear on what they will spend if they have no income other savings.
Anyone born after April 5, 1978, will not receive their state pension until they are 68 years old, yet the survey found the average age they expect to retire is 64.
The firm says many are failing to account for the switch from final salary to defined contribution pensions removes any guaranteed payments on retirements.
The number of people in final salary schemes is falling – the figure has already dropped from 52% of over 55s giving up work in 2008 to 45% in 2015 and will continue to fall in the future.
Average pension income in 2015 is an average £17,000 a year, which is the highest level for three years, but those over 55 still working expect a pension of £19,400, while the under 35s are looking forward to a pension of £21,400 a year.
“The actual numbers just do not tie up with the pension expectations of those still in work,” said Stan Russell, a retirement income expert at Prudential.
“Retiring early for younger workers do not make sense because they are likely to live longer and run the risk of running out of savings if they give up work too early.
Heading for disappointment
“The average person retiring today is 60 years old, but for those born in the 1970s, it’s likelier to be when they are much older.”
The Prudential argues that the research shows workers have unrealistic retirement goals t5hat may lead to disappointment in later life.
“Lots of workers want to spend time doing what they enjoy rather than working and would rather do it sooner than later, but this is not going to happen for the vast majority,” said Russell.
“As always, the best advice is start saving as early as you can, even if it’s only a little and maybe talk to a financial adviser who can give you a more realistic interpretation of your pension and retirement objectives.”