About 14 million people aged 25-34 could be underestimating the pot they need at retirement by nearly £400,000, new research has suggested.

This age group has underestimated their life expectancy and likely retirement age while leaving themselves unprepared for retirement, the latest BlackRock Investor Pulse survey indicated.

It found that 25-34 year olds expect to fully retire at 62 and four in 10 want to semi-retire at 57.

The report said there was confusion about life expectancy.

{desktop}{/desktop}{mobile}{/mobile}

It stated: “Those aged 25-34 have trouble grasping how many years lie ahead of them, and how many years they need to save for. One in five millennials will live to see their 100th birthday yet they predict they will only live till they are 79.

“A 30 year-old today can expect to live till around 90 years of age. This confusion could lead to a significant retirement shortfall.

“In terms of income in retirement they claim they will need £27,000 annually and believe a pot of £167,000 will get them there. In fact, to last them throughout retirement they’ll need a pot of £540,000.”

This leaves a shortfall of about £373,000, the researchers said.

On average, respondents believed that the right age to start saving for retirement was 25, yet half (48%) have not yet started and one in five (21%) have no savings at all.

People in this age category, dubbed ‘Millennials’, appeared to draw a distinct line between saving and investing, the survey showed.

The report said: “They also choose to squirrel away high levels of cash in their bank account despite having substantial debt levels. On average they have £3850 in debt (excluding mortgage debt) yet, over the last year. Of those with savings, they have an average of £1900.”

Tony Stenning, savings and investments expert at BlackRock, said: “Millennials are wrestling with three clear challenges when it comes to their finances. The first is saving enough money to get on the property ladder.

“The second is the difficulty in visualising, and therefore preparing, for retirement and living a much longer life. Retirement is a priority for one in four younger people but the goal of being a homeowner means it falls behind in their list of priorities.”

Alex Hoctor-Duncan, investment and savings expert at BlackRock, said: “The survey shows that millennials completely separate saving and investing from their debts. In some ways it’s not surprising as technology has made it easier than ever before to buy now and worry about the consequences later.”