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Pension poll finds people don’t realise how long they will live

Individuals tend to underestimate their longevity by five years or more, believing their pension will be payable for a shorter period than it really will, seriously affecting their provisions for retirement, says new research.

The underestimates break down as over four-and-a-half years for men and nearly six years for women, according to research by Nottingham University Business School.

The study found that every one year of higher longevity estimate increases the proportion buying pensions by about 0.15 per cent. If the five year underestimate were corrected, then voluntary pension take-up would be increased by 0.75 per cent to over 2 per cent, in effect a 50 per cent increase.

Even in their 60s, when people are most likely to be buying annuities, men typically underestimate their likely lifespan by around three years and women by over four-and-a-half years.

People do, however, factor in smoking with non-smokers expecting to live to 80.5 years while smokers have lower expectations, – on average 76.8 years.

Centre for Risk & Insurance Studies at Nottingham University Business School director Chris O’Brien says: “If the population had a better understanding of how long they were likely to live they may be more likely to buy pensions than they are now. perhaps the FSA has a role in educating people here.”

“Employers too may want to use life expectancy data to highlight the value of the occupational pensions that they are providing.”

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