Investors “could be over reliant” on the state pension

Pensions awareness among investors is high enough that they understand the issue of longevity, but not so high that their investments will plug the longevity gap, research has found.

Investors realise they could live for over two decades after they retire but “relatively few understand the financial commitment this represents”, said Schroders, a fund management firm which surveyed 20,000 people across 28 countries.

The firm found that investors are reliant on the state for much of their pension, with unrealistic income expectations in growing their pensions by saving.

Investors expect to grow their pensions savings using three main sources: the state pension (19%), their company pension scheme (18%) and their own savings and investments (21%).

Schroders found that investors were over-optimistic about income returns, expecting a minimum of 9.1% per annum. Investors also had a short-term investment horizon of 3.2 years when five years is recommended.

This over-optimism could lead to a pension shortfall says Schroders.

“With people spending longer in retirement, the emergence of personal retirement funding gaps, governments struggling to balance their books and the global economy slowly recovering from the credit crisis, it may be that investors need to be doing more now for themselves and rely less on the state,” said Lesley-Ann Morgan, global head of defined contribution at Schroders.

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