Sleepwalking into retirement? Workers in the dark on pensions

The survey, carried out by Friends First, found that people are underestimating the true cost of living once they hit retirement age.

The results show that a quarter of adults are ill-informed about the size of the State pension despite the fact that almost half of the population (44pc) will depend on it.

The survey found that people are more concerned about planning for a holiday or making home improvements than they are about making long-term pension plans.

One third of all respondents stated that saving for the short or medium term was their main priority.

Almost half of respondents said affordability was the main barrier preventing them from engaging in long-term pension planning.

In addition, people surveyed said they expect their cost of living to be cut in half when they reach retirement age. The average cost of living for those surveyed is €19,865 (€380 per week), but respondents believe that will drop to €9,810 (€188 per week) after they get to 66.

For those who will be dependent on a State pension, the above figure would leave just €40 per week of disposable income.

In a sign of the strengthening economy, 50pc of people said they had seen some improvement in household income over the past year, mainly due to a rise in wages. Younger people are most optimistic about their prospects in retirement, with one third of 25 to 34-year-olds believing they will have sufficient funds.

However, the survey also found that this demographic was the least likely to own a private pension.

Exactly 40pc of this group also expressed confidence that they could survive on the State pension.

The average annual mortgage repayments for those questioned was €5,959.

Respondents said they anticipated that figure would drop to just €668 upon retirement. Simon Hoffman, director of pensions and investments with Friends First, said: "It is very clear that there is a huge gap in knowledge when people are setting out their pension goals, with many looking at unrealistic expectations as to what their contributions will deliver at retirement.

" In conjunction, there needs to be a greater understanding of the role the State pension plays in an individual's overall pension planning," he said. "We are seeing in the study that people are living increasingly busy lives and their focus is less on securing their financial future and more on their short to medium term needs.

"But, sleep walking into retirement can only lead to a rude awakening", Mr Hoffman added.

Healthcare is one of the few areas where respondents believe their outgoings will increase.

Their forecasted spend would rise to €982 in retirement from the current level of €729. The pensions survey also shows that people expect to be almost debt free by the time they hit retirement age.

People's current outgoings on loans average €1,337, but the expectation is that this number would drop to €226 in their golden years.

Despite the prospect of having significantly less disposable income, those questioned said they expected their expenditure on leisure activities to increase to €1,401 from the current level of €1,365.