The UK’s over 50s need double the amount they think to generate a decent income in retirement, according to new research from Saga Investment Services.

The findings come as Saga launches its new ‘Look Ahead’ retirement planning tool to help the nation’s over 50s get on track with their retirement plans.

In a new survey, over 50s were asked to estimate what kind of annual income they’d need to cover a range of different retirement lifestyles, and how much they believed would be enough to deliver the income they want.

To cover the essentials, over 50s said they’d need an average annual income in retirement of £15,200, estimating this could be generated from an average pension pot of £143,830. According to Saga figures, however, a pension pot of this size would only generate £7,940 in guaranteed annual income for life for a healthy 65-year old – a shortfall of almost 50%, meaning they would need double the pension pot to meet their retirement income target. There were also stark differences between men and women – men underestimated what they needed in their pension by 41%, women by 66%.

Saga also calculated how long the estimated pension pot would last in drawdown, where a pension is left invested, the average ‘essential income’ is drawn out annually and the fund grows by 5% per annum, net of fees and charges. In this scenario, a saver would run out of money after 13 years; a man’s would last 15 years, while a woman’s would last just eight.

To have a ‘comfortable’ lifestyle, an annual income of £21,630 was required. Yet again, however, the actual pension needed to generate that income was double the estimates of Britain’s over 50s, who thought that around £194,000 would be sufficient. This would only generate a £10,170 annual guaranteed income, leaving a shortfall of around 50%. For men, the shortfall dropped to 45%; for women, it rose to 63%. In our drawdown scenario, the fund would be exhausted after 12 years.

It was a similar story for amount of income needed for a ‘luxurious’ lifestyle, which included going away on holiday frequently and travelling in style, having more expensive social activities, such as theatre trips, and frequent home refurbishments.

On average, over 50s said they’d need £46,640 to live like this in retirement, and estimated needing £419,520. In fact, that would only generate £22,720 – leaving a 51% shortfall in income. Men underestimated their pensions by 46% and women by 62%. Drawing down an annual income in our scenario would see a saver running out of money after just eight years.

Nici Audhlam-Gardiner, managing director of Saga Investment Services, said: “It’s worrying that Britain’s over 50s are misjudging the level of savings they need to have a decent and comfortable retirement income. Our research found that 80% of people simply couldn’t begin to make an estimate of how much they need to save to get the lifestyle they want, with the result that they are severely low-balling their pension and savings plans.

“It’s vital that people take into consideration all of the financial possibilities, sources of income and investment options to hit their retirement income goals. That’s why we’ve launched our ‘Look Ahead’ retirement planner, an easy-to-use, interactive and plain English tool that can help people make sure their retirement plans are on track.”