Europeans are the least likely cohort of people to underestimate the cost of living in retirement.

The finding comes from Schroders’ Global Investor Study 2018, which discovered that people from around the world, aged 55 and over, predict that they will need an average 74 per cent of their current income to live comfortably in retirement.

In reality, retirees globally are, on average, receiving 61 per cent of their final salary annually.

The gap between expectation and reality is smallest in Europe, with retirees receiving 63 per cent of their final salary, while believing that they need 72 per cent to fully enjoy non-working life.

In Portugal, savers are set for a pleasant surprise. They estimated that they need 46 per cent of their current annual income to live well, with retirees actually benefiting from a retirement income that is the equivalent of 72 per cent of their final earnings.

The contrast is greatest in Asia, with retirees receiving 59 per cent of their final income, while people approaching retirement are expecting to receive 76 per cent.

Part of this discrepancy can be explained by a miscalculation of the costs of basic living in retirement. Globally, people expect to spend an average 34 per cent of their retirement income on essential expenses, despite needing nearly 50 per cent to cover those costs.

The disparity in perceived living expenses in Europe is least pronounced in Austria and Germany, where people expect to spend 37 and 38 per cent respectively on basic goods, while only having to actually having to allocate 46 and 47 per cent, respectively.

The study — which surveyed over 22,000 investors from 30 countries — has also found that 15 per cent of retirees globally do not have enough income to live comfortably.

In Europe, this figure was 14 per cent. Other than India, the country where respondents show the greatest level of comfort with their retirement income is Denmark, where 93 per cent say their income is sufficient.

The research also found that retirees globally are continuing to invest significantly, allocating 19 per cent of their entire retirement savings to investments. In contrast, those yet to retire only anticipate investing 9 per cent of their retirement savings.

In Europe, the figures were broadly the same, with 18 per cent of people investing their savings when retired, while only 8 per cent of non-retirees believe that they will have to keep building their capital.

Schroders global head of retirement, Lesley-Ann Morgan, said: “There is a real danger that people globally are underestimating the proportion of their retirement income that will need to be allocated to basic living expenses and the amount of money they will need to live comfortably in retirement, particularly in the current environment of low returns and increasing inflation.

“Perhaps as a result of not having enough in retirement, our study showed that retirees were continuing to invest, and this often represented a larger amount than they expected prior to retirement.”

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