Higher earning households could be under-saving for retirement, research from Hargreaves Lansdown has found, raising concerns that some could be on track for a "nasty shock" about their standard of living in retirement.

Hargreaves Lansdown’s Savings and Resilience Barometer revealed that almost half (47 per cent) of all households on track for a moderate retirement income are also on track to hit a comfortable standard standard of living.

In addition to this, the research showed that 39 per cent of the top fifth earning households are on track to hit a comfortable standard of living in retirement.

Hargreaves Lansdown highlighted this as evidence that while many households are doing well there could be some higher earning households who are on track for a nasty shock.

“Building up your pension is a huge step towards making yourself financially resilient. Knowing you’ve got enough set aside for your future is hugely empowering,” Hargreaves Lansdown head of retirement analysis, Helen Morrisey, explained.

“However, it is important that in building up one area of your finances that you don’t take your eye off the others and leave yourself with gaps that can cause you problems later.”

Morrissey said that one “key resilience gap” is around protection, most notably critical illness, with the research showing that 35 per cent of households on track for a moderate retirement income had adequate critical illness protection.

“Though we don’t want to think of a time where we may become ill, it is something that must be planned for as a period of time out of the workplace can place real pressure on your finances and undo much of your previous hard work in building resilience,” Morrisey stated.

However, she also said that balancing short-term resilience with long-term plans was “vitally important”, particularly when managing debt.

Morrisey said that savers might be in a position where they are managing debt payments easily, but a period out of work or illness could soon mean they start to struggle.

The barometer showed 17 per cent of households on track for a moderate retirement were resilient when it came to affordability of future debt payments, suggesting that there is a need to pay down debt or ensure adequate protection is in place in case of an income shock.

The barometer used Pensions and Lifetime Savings Association's Retirement Income Methodology until 2022 but following a change in methodology uprated incomes by wages.

Under the Hargreaves Lansdown methodology, a couples moderate retirement income is estimated at £38,128, while a couples comfortable retirement income is estimated at £61,117.

---