When participants were asked how much they need to generate £10,000 a year retirement income on top of the state pension, the average estimation was £100,000. In reality, figures are much higher. On average, men guessed £150,000, women said £75,000, while millennials guessed £60,000. The actual figure is closer to £200,000.

Matthew Yeates, an investment manager at 7IM and co author of: ‘Challenging Traditional Assumptions Towards Risks and Retirement’, said: “The fact that people are woefully inaccurate at predicting how much it costs to generate an income in retirement is a problem.

“It shapes our savings habits but also how we view the benefits we all receive from the state pension. The state pension is bemoaned by many as inadequate to live upon (and for very many it is), but the value of the state pension is currently estimated at around £200,000. That’s a big number and would shock many based on this survey, perhaps the shock they need to realise the kind of savings necessary to supplement it in any meaningful way.

“Bottom line, people need to be saving more and earlier. Even relatively small amounts can add up over time. By way of illustration, £50 per month in a fund targeting 6% a year (although there are no guarantees), if all went to plan, would have grown to £23,000 over 20 years, £49,000 over 30 years and £96,000 over 40 years.

The underestimation does not mean people worry less about the future however, as the study found that retirement is the biggest money worry for all age groups, with more than a quarter (28%) very worried about running out of money in retirement, followed by paying for care in later life (27%). 

Some 22% are worried about having enough money for a rainy day and 22% about ‘just getting by’. The study found that millennials are just as worried as their parents about having enough money after retirement. 

Justin Urquhart Stewart, 7IM’s co-founder and head of corporate development, said:“It’s interesting that millennials, who have many years of working life ahead of them, are almost as worried as their parents’ generation about funding retirement.”

Despite major money worries most do not talk about the issue and the study found that seven out of ten people keep their financial anxieties to themselves. 

The survey is based on online interviews with 2,005 adults across the UK between 7-10 November 2017 and was conducted by research company Opinium.