The 100-year life: all work and no play?

Increased life expectancy has given rise to fears about funding a comfortable retirement. But it’s not all bad news, as Senior Adviser Richard Rochford explains…

In 1881 the world’s first state pension was introduced by German Chancellor Otto von Bismarck. You had to be 70 years old, and it was expected that you would only live a few years after that. The world looks very different today – not least because many of us can expect to live well beyond 70, thanks to better access to medical care and healthier living.

In fact, a recent study found that around a third of wealthy individuals in the UK are confident about reaching the big 100.1 Not only that, in 2014, the ONS revealed that the number of people living into triple digits had increased by 70% in a decade – meaning a certain royal centenarian team needed to employ more letter writers!2

Despite being a superhero cliché, it seems that ‘living forever’ comes at a cost, and many people are now anxious about the financial implications of this extended old age. If you’re lucky enough to fall into this older age bracket, you’ll need to stretch out your savings further than planned so that you don’t outlive your financial security.

How to plan for the 100-year life

For some, the question is not how to retire successfully, but how to retire at all. Today, a 65-year-old man in the UK has, on average, another 18.6 years of life ahead of him, while 65-year-old women will live another 20 years plus.3

In response, people are already considering working past the traditional retirement ages. For the first time in UK history, there are more than 10 million people aged over 50 in employment.4 And with the State Pension age rising, the number of older workers is expected to keep growing.

Rising life expectancy is also making us reconsider the right time to access pension savings. In the past, middle age was deemed to start in one’s 30s. Nowadays, middle age doesn’t start until 45 or 50. If this is the case, then the traditional retirement ages of the past are outdated and drawing on a pension at 60 or 65 may be too early.

If life expectancy is something of an educated guess, then planning for retirement income should probably contain a mix of guarantees and flexibility. Ask yourself how much you will need, how much you can afford to put away and how you want to enjoy the money you’ve saved. Having a retirement plan will allow you to reach these goals, while being flexible if your situation changes.

Here are some things to think about:

  • Time – The earlier you start putting money away, the greater your chances of building a pension pot that can last the rest of your life.
  • Annuities – Although the much-maligned annuity has fallen out of favour, it is still the only way to guarantee income for life with no investment risk, and therefore shouldn’t be discounted.
  • Investments – You can keep your options open through retirement and leave your money invested. The compounding effects of equity market growth and reinvested dividend income will help to increase the likelihood of generating a rising level of income.
  • Ill health – Hidden within the life expectancy puzzle is the fact that our longer lives won’t necessarily be all in good health.
  • Pension contributions – Even if you have started saving later in life, there are still opportunities to catch up. People in the UK can make pension contributions of up to 100% of their earnings or £40,000, whichever is lower (subject to limitations). If you pay the maximum, the government will reward you in the form of tax relief.

The retirement you want

From travelling the world to living comfortably and being able to treat the grandchildren, whatever retirement means to you, it is unquestionably a time of life that we should be able to fully enjoy. Rising longevity is undeniably a big challenge facing our society, but it is one that can be managed with foresight and careful planning.

For more information

If you have a question about retirement planning or would like more information about our services, please contact Wellesley Wealth Advisory on 01444 848508 or via email at info@wellesleywa.co.uk.

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Sources

1 UBS Investor Watch, 2018
2 The independent, Queen’s centenarian letter-writing team forced to expand, September 2014
Office for National Statistics, National Life Tables, 25 September 2018
4 Office for National Statistics, UK labour market: January 2019

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Author: Richard Rochford
Author: Richard RochfordSenior Adviser
richard.rochford@sjpp.co.uk