Pension predictions hit reality gap
People's expectations on life after retirement are often far from reality, with those closest to collecting their pensions the most pessimistic.
New data from Alliance Trust Savings shows that the Baby Boom generation is convinced not only that they will be worse off than the current generation of pensioners, but that their children will also be living it up in retirement.
However, all industry and government predictions show that those currently approaching retirement will be the best-off generation of pensioners ever and that the aging UK population will mean in generations to come, Britons will be forced to work on later for a smaller share of pension resource.
But it is not just older workers that seem to have the wrong end of the stick.
Under-35s are currently convinced that the position will dramatically improve, meaning they will have a far more affluent retirement than older generations.
"Economists have long predicted that the baby-boomers will be one of the most comfortably off generations in recent history, but this sunny outlook has clearly not filtered through to those approaching retirement," said Hyman Wolanski, head of pensions at Alliance Trust Savings.
"Hardly surprising when we consider the doom and gloom about pensions in the last few years, and its impact on those wrestling now with how they will get by in their old age.
"However, it's really the younger generations who should be worrying, and planning earlier; but our research suggests that, instead, they are either peering through a rose-tinted lens at a comfortable retirement or just burying their heads in the sand.
"For many younger people it's much easier to picture their own retirement in terms of how retired people live today, than to get to grips with the economic and social challenges that they face in securing a comfortable standard of living in their old age."
Alliance Trust's research shows that baby boomers (aged 55 and over but not yet retired) are the most likely to think their relatives are well off in retirement, the most likely to think their children will have a better retirement than them, and the most pessimistic about what their level of retirement income will be.
By comparison, young adults (workers under 35) are the most likely age group to believe they will have a better standard of living than their retired relatives.
Fortunately, young adults are also the group with the best chance of improving their situation themselves, as they have the longest amount of time to save for their sunset years.
"The good news is that future generations will, hopefully, live longer and healthier retirements. The sobering side is that younger generations will need to start planning and saving for their old age far earlier and more seriously than today's pensioners, or face an extremely restricted lifestyle," Mr Wolanski concluded.
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