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If you think about how long you are likely to live, you’ll probably make a guess based around the experience of your parents or grandparents. However, recent longevity data from the ONS makes for some sobering reading and means you may need to rethink.
Boys born in the UK in 2023 can expect to live, on average, to age 86.7 years and girls to age 90. For those born in 2047, 17.3% of boys and 24.7% of girls could make it to 100 years old.
Of course, this is great news, but it does mean we need to think about, and prepare for, a retirement that could last in excess of 25 years.
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It’s a prospect that the current government is wrestling with. A larger, older population puts extra pressures on the state pension as it’s being paid to more people for longer. We could see state pension age rise further to meet these costs, but this needs to be balanced against people’s ability to keep working.
Boosting private pension provision becomes ever-more important in helping us to fund these longer lives. Auto-enrolment has done a great job so far in getting more people saving into a pension and over time we will see people retiring with better pensions.
However, with the latest data from Hargreaves Lansdown’s Savings and Resilience Barometer showing only 36% of households are on track for a moderate retirement income, it is clear that more needs to be done in the coming years.
This could be tackled by increasing auto-enrolment minimum contributions though it’s important that only those who can afford to save more do so. Making people pay more into their pensions could jeopardise their ability to meet their living costs today.
The role of the employer could be looked at more closely to see if they can be incentivised to increase their own contributions. One approach could be for them to increase their contributions for those employees who are able to increase theirs. This could ensure any extra spend is well targeted and that those able to boost their retirement planning are helped to do so.
Read more: How to fix gaps in your state pension contributions
For now, the best approach is to take stock of where you stand and consider whether your pension is going to last a lifetime.
Pension calculators are a great place to start and can show you how much you are on track for and the impact of paying in extra contributions. If a calculator reveals a shortfall, you can take a closer look at everything from your contributions to your investment strategy and retirement plans to find a way to close the gap.