This means that retirees estimating they will need £100,000 of private pension savings to top up their other income, such as state pension, could actually need about £150,000.
Consumers are routinely underestimating their life expectancy compared to the national average, which will have a bigger impact following the pension reforms when retirees will be able to access their pension savings, taking some or all of their funds.
Women aged 50-65 years say they expect a person of their age and gender to live on average to 84 years, while men say 80 years is the average age. Office for National Statistics data shows however, that at age 65 years, the average life expectancy is 86 years for women and 83 years for men.
Additionally, Aviva’s analysis shows that people who are savers and healthy are likely to live even longer, to 89 years for women and 88 years for men – up to eight years longer than the life expectancy predicated by the average 50-65 year old.
Asked about how long they personally expect to live, a significant number of people say they will die before they reach their average life expectancy: 29% for men and 23% for women. Of those predicting a shorter life expectancy, men say they will die on average 13 years earlier at 67 years, and women in this group say they will die on average 12 years earlier at 72 years.
John Lawson, Aviva’s head of policy, said:
“Given the momentous changes to the UK pension rules, there is a lot of debate around the importance of people budgeting appropriately for the whole of their retirement years. An essential part of that planning is getting a realistic view of how long you are likely to live.
“Our research suggests that people need to rethink how much money they will need for their retirement, or the age at which they retire, as it is likely they are underestimating the number of years they will need to live off their savings. A good understanding of longevity is a vital part of retirement planning, particularly as consumers will have far more freedom in how they use their pension savings.”
