The gap between expectation and reality when it comes to retirement age is seven years, according to the Axa Wealth Pension Index.
The average age that employees in the UK would like to retire is 58. The average age that employees expect to be able to afford to retire is 64. And the average age that employees will be able to afford to retire is 71.2.
The index shows that a typical male pension saver wanting to retire on a similar pension income to that which they would have achieved five years ago will now need to work for an additional six years and one month, making his pension affordability age 71.1 years old.
The index indicates that females fare even worse than their male counterparts. The female pension affordability age now stands at 71.3 years, an additional six years and four months.
The male index shows that pension affordability has fallen by almost 40% since the end of 2005 and the average male saver who chooses to go ahead and retire today would face a pension of just over half what they could have obtained five years ago. The female index shows a decline of 40% in the potential realisable pension annuity.
Pension affordability as calculated by the index has improved in the last 18 months. The projected retirement age hit a high of 75.8 for men and 76.1 for women in March 2009.
Mike Morrison, head of pensions development at Axa Wealth, said: “Due to significant market volatility in recent years, pension savers face a significant shortfall in retirement income or a much later retirement age.
“In the longer term, equity markets continue to offer the potential for creating enhanced retirement incomes, but it is clear that this needs to be afforded some form of protection in periods of extended volatility as we have experienced in the period under investigation. People insure their homes and other valuable assets, but not their financial future.”
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