New figures from the Saltus Wealth Index show 96% underestimate how much money they will need for a comfortable retirement and are currently almost £600,000 short of where they need to be.

More than a quarter (28%) thought they would need less than £400,000.

The majority (65%) thought they would need between £200,000 and £800,000 while, on average, respondents thought a pot of £536,000 would be needed, while those over 55 thought they would need £661,650. 

In reality, retirement savings of more than £1m are needed – £464,000 more than the average estimate and more than double the amount respondents nearing retirement have currently put away.

Savings of £536,000 would actually only provide an annual income of £21,400, rising to £26,500 for a pot of £661,650, wealth manager Saltus said.

According to the Pension and Lifetime Savings Association (PLSA), for a “comfortable retirement” an individual needs an annual income of £43,000, which would require a pension pot of around £1.1m, excluding the state pension.  

Just 4% of respondents said they thought they’d need more than £1m in their pension to achieve a comfortable retirement, meaning 96% are underestimating what they might need.  

Mike Stimpson, partner at Saltus, said: “Our research highlights some important issues around expectation versus reality when it comes to wealth with a clear misunderstanding surrounding how much money is needed for a comfortable retirement.  

“If anything, the perception gap between expectations of what will be needed and what is actually needed could get bigger as life expectancy continues to grow. Living to 100 could become commonplace, and the impact that will have on retirement planning would be huge.”

• The survey included 2,000 UK respondents (aged 18+) who have £250k+ of investable assets. Research was conducted by Censuswide online in December 2023.