Millions of middle-aged employees have no idea how much they need for a comfortable retirement or the amount they have saved so far, resulting in some people working longer than they want or trapping themselves in needless frugality.
The findings come as families lose confidence in their finances. Consumers held off buying big-ticket items last month, according to IHS Markit’s household finance index, amid fears about the wider economy and the prospect of a no-deal Brexit.
Pensioners are particularly cautious. The Institute for Fiscal Studies found on average they draw down just 31pc of their wealth between age 70 and 90, about 1pc a year. It is more likely to be bequeathed than spent.
Two couples reversed these trends in their lives to transform their retirement. Steve Smith (not his real surname), 67, who lives with his wife Jane, 61, in Wiltshire, worked at pharmaceutical companies before starting his own firm. After the 2008-9 financial crisis his income halved.
“The scenario was one of woe and misery,” he said. “I had worked for a number of firms so my pension pots were diverse and I was in the dark about them. Complex information from providers meant I was in a state of anxiety and despair about whether I would have enough to retire in 2016.”
Mr Smith was among an estimated five million employees aged 45 and over who are unaware what they have saved for retirement, according to research this week from Aviva.
Lindsey Rix of the pension firm said: “Many British employees are approaching retirement with their eyes closed – with no realistic idea of how near or far they are from their destination.”
Linda Chick, 65, was in a similar position. Married to Jim, 74, for 16 years and the principal breadwinner, she said she had only recently started to enjoy the fruits of 45 years of labour.
“I’m a naturally cautious person when it comes to money, always thinking about a rainy day,” she said. “I come from a generation where you were encouraged to look after the pennies and not be extravagant.”
Mrs Chick, a human resources consultant who started her own firm 10 years ago, worked by choice. But a health scare and a financial adviser made her reassess life.
“I had breast cancer so that did focus the mind, that you can’t take it with you. It was treated successfully but it made me think, ‘why am I saving?’ The adviser gave me the financial security to spend some of my money. It takes someone to tell you the numbers, and the health scenario, to realise this isn’t a rehearsal,” she said.
The couple have since upgraded their second home in Spain to a villa with a pool and are looking at cruises in Croatia. “Future aspirations? More time on the golf course!” Mrs Chick added.
The realisation that you can afford a different lifestyle can be life-changing. Mr Smith said finding out how much he had saved “was a trip down the road to Damascus” and “as good as getting married and having children”.
He had overlooked a large retirement pot. With three other “final salary” pensions, the couple are able to live off the income generated without touching the capital.
“Suddenly I knew how much I could spend, what I needed for income and how much I had put away. The clouds lifted.”
He has shunned using pension freedoms to withdraw all his retirement cash in one go, but may reconsider at age 75 to avoid inheritance tax.
The couple have converted their double garage into a flat with a view of the Vale of the White Horse for their daughter. “It cost us £55,000 and we recently had it valued at adding £200,000 to our house,” Mr Smith said.
“I’m keen on model railways and collecting stamps. Jane likes embroidery and painting. Creating the flat for our daughter meant setting rooms free for those hobbies. We were told to live a little – we are spending while we’re young and it’s wonderful.”
Both couples hired Ovation, a financial advice firm, to help them overhaul their finances. Mrs Chick said it gave her the confidence “to let my hair down”.
Ovation’s motto, according to its founder Chris Budd, is: “We help people use their money to accumulate life.” He added: “We allow people to realise that they have enough.”