More than 1.8 million savers are missing out on the benefits of long-term pensions investment by risking their retirement on the stock market, research by Lincoln Financial Group shows.

They are putting money directly into shares and unit trusts, or investing via ISAs and PEPs to fund their retirement instead of saving into a recognised pension scheme.

Lincoln Financial Group is warning that investors are risking their retirement income on the stock market. This risk could be reduced by saving into pension products, which as well as offering some protection against volatility in share indices, also offer tax benefits worth 22% to basic rate taxpayers and 40% to higher rate taxpayers.

Around one in four of those aged 55 plus who invest in shares regard their investments as an alternative to their pension, the research shows. A fifth of those are considering increasing the money they have invested in the stock market despite recent volatility.

The FTSE-100 index endured a rollercoaster ride in 2007 starting at 6,220.8 and reaching an intraday high of 6,754.1 on 13 July before closing at 6,546.9. So far in 2008 it has suffered the worst start to a year since 1978.

Lincoln Financial group head of product and marketing Simon O’Connor said: “It is worrying that so many people believe direct investment in the stock market could be an alternative to saving into a pension. People heading for retirement playing the stock markets to ensure they can have a comfortable standard of living are playing a dangerous game.

“Stock market volatility this year has been pronounced and the recent past has seen four years in which the FTSE-100 has ended the year down. In fact the FTSE has still not returned to its high at the end of 1999.

“Long-term investment is the key to successful retirement income planning and pensions are the ideal vehicle to deliver the retirement income aspirations of savers. The tax advantages alone make pension saving demonstrably superior to direct stock market investment.”