With millions of Generation X pension savers nearing the age where they can begin to withdraw their pension, many are underestimating how long their savings will need to last, Just Group has found.

According to new research from Just, those born between the mid-sixties and early eighties are underestimating their life expectancy by around a decade. Men aged 40-54 expect to live on average to 78.6 years, while government projections suggest it is likely to be closer to 87.5. Similarly, women in this age range expect to live to 80.5, despite projections showing that their life expectancy is more likely to be closer to 90.1.

“The combination of easy access to pension cash and underestimating life expectancy could have some toxic consequences,” said Just Group group communications director Stephen Lowe.

“Nearly a million members of Generation X are set to arrive at age 55 every year for the next decade or so and will face crucial decisions about whether to take pension money or leave it to keep growing. Without a realistic idea of how long they will need that pension fund to last, it will be very difficult to make an informed decision.”

Nonetheless, the research also indicates that people do eventually become more realistic about life expectancy as they age. From the age of 70, estimates are closer to official projections, the analysis finds, however, this can generally be “too late”, Lowe noted.

This generation are likely to experience financial pressures from parents who are living to greater ages and children with high university costs and a delayed entry to work.

With this, Lowe added: “You can understand the temptation of taking cash out of the pension but each pound taken early on might mean perhaps two pounds less a few years later when money is tighter. As it stands this generation is almost certainly going to need to work to greater ages than before, but that depends on the jobs being available and them being healthy enough.

Lowe explained that this generation are caught in between Baby Boomers, many of whom received guaranteed pension incomes from DB pensions and Millennials who have many years to build up an auto-enrolment DC scheme.

However, he added that the timing is “not all bad” for this generation as they could have wealth in property also. “They have ridden the property price rises and it is likely some of that equity built up will need to be extracted later – through downsizing or equity release – to help pay the household bills or bigger sums to finance care costs,” he said.

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