Pensioners ‘retired into a very different world’ – Britons urged to plan ahead now – Express
‘People put their heads in the sand’ with retirement says expert
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The number of centenarians (people aged 90 and over) in the UK rose to its highest ever level in 2020, reaching 15,120 – an increase of almost a fifth from last year – according to new data from the Office for National Statistics (ONS). As people live longer and longer, their needs change with regard to the amount of money they need to sustain them once they finish work.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown gave her thoughts on the data, stressing the notion that future pensioners will enter a completely different world than retirees of yesteryear.
She said: “A record number of centenarians are defying the pandemic, but they’re wrestling with inflation.
“It’s a tribute to developments in healthcare and lifestyle in recent years, and means we also see the number of people aged 90 and above continuing to grow – albeit at a slower rate than before.
“This is hugely positive but also shows the importance of long-term planning when it comes to retirement. A man celebrating his 100th birthday today would have hit state pension age in 1986 and retired into a very different world to the one we live in today.
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As more people in the UK live into their 90s, pension needs are changing (Image: GETTY)
“He would have received a basic state pension of around £38 per week and paid around 20p for a pint of milk – he may have rented rather than bought his TV.
“He has witnessed huge price inflation over his retirement lifetime, and is facing another round of price hikes. It shows the importance of solid retirement planning that stands the test of time.”
Ms Morrissey believes that the way people currently save for retirement may not be enough to provide them with an adequate pension later in life, but is encouraged by the Government’s plans to flesh out the current auto-enrolment framework as a means of boosting Britons’ retirement savings.
She said: “It is well known that we tend to under-estimate our life expectancy, but this data shows the increasing likelihood of needing to amass a pension to last thirty years or more. This is particularly the case for women who continue to be much more likely to reach these older ages than men.
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“Policies like auto-enrolment mean that more people will enter retirement with a workplace pension, but more needs to be done to ensure people’s retirement planning is as robust as possible.
“It is a huge positive that Pension Minister Guy Opperman has re-affirmed the government’s plans to expand auto-enrolment to the over 18s and abolishing lower earnings limits. This means more people can make a start on their retirement planning earlier.
“Meanwhile, today’s data shows the first fall in life expectancy, with men’s life expectancy at birth falling by seven weeks between 2015-17 and 2018-2020. This is likely to be largely attributable to the pandemic, and we could see increases in life expectancy in the coming years.”
Rosie Hooper, chartered financial planner at Quilter also had her say on the data, and she stressed that further increases in how long people are living should be expected over the coming years.
What is state pension? (Image: Express)
She said: “New ONS statistics show that the population of people aged over 90 has still grown in 2020 but at a much slower rate than the 3.6 percent in 2019. However, despite the pandemic the number of centenarians in the UK rose to its highest ever level in 2020, reaching 15,120, an increase of almost a fifth from last year.
“There are lots of factors, which have caused this including massive improvements in health care and spikes in the number of births after the end of World War One.
“Although some statistics show that life expectancy is starting to plateau in its growth, we should not be under the illusion that we are going to start seeing a drastic decline in how long most live.”
She said other ONS statistics which have been released showed “life expectancy at age 65 was 18.5 years for males and 21.0 years for females, which represents a long period of time to fund without an income”. These estimates are very similar to those for 2015 to 2017 and with only a slight decline of 1.0 weeks for males and an increase of 3.1 weeks for females.
“Therefore, don’t be fooled by the drop in life expectancy, as there is still a good chance you will need the money well into your 80s if not longer.
Britons should plan early for their retirement (Image: GETTY)
“In fact, life expectancy tends to increase in bursts rather than in a linear fashion, with the bursts corresponding to medical breakthroughs. What this means is that everyone should plan their retirement around the very realistic possibility of living to 100.”
Ms Hooper echoed the sentiment that Britons should plan early and effectively for their retirement to avoid being left short during their later years.
She said: “Building up a pension pot that can last this long is no easy feat and will be much easier if someone starts early. Auto-enrolment means many more young people are contributing to a pension but at the current default contribution levels some will still not build up the pots they need to fund an increasingly longer life.
“It’s important to remember it’s never too late to save for retirement. If you are fortunate enough to have your employer make contributions to your pension plan, along with favourable tax treatment and potential for investment growth, any pension contributions you make in later life can still have a big impact on your standard of living in retirement.
“For those worried about their finances in later life it is always prudent to see a financial adviser who can look at someone’s unique financial circumstances and create a plan that optimises the chances that someone will have a regular income into their 90s and beyond.”
