Life expectancy in the UK is expected to rise to 100 years old by 2066, according to recent figures from the Office for National Statistics (ONS).
While this may seem like a while off, currently eight in ten people (78%) over the age of 50 underestimate how long they are likely to live and therefore not saving enough for reitrement.
Research from Retirement Advantage, suggests that many are likely to experience a shortfall of up to eight years in their retirement income. So, is it possible to make your pension last until you turn a century old?
Underestimating life expectancy
On average men and women aged 50-64 already underestimate how much they will need to save for retirement by up to eight years.
While many currently guess their life expectancy to be 82 years old, official figures from the ONS reveal that the average life expectancy for men and women aged 50-64 is 88 and 90 years old respectively.
Overall, by 2066 in the UK 50% of all newborn baby girls and 44.2% of newborn boys will live until 100 years old.
Find out how much money you’re likely to have during your retirement using our pension calculator.
Renters over 50 are currently facing a £43bn shortfall in the amount of money they need to save to cover rental costs throughout retirement.
According to Scottish Widows, one in eight retirees will live in rented accommodation by 2032 and will have to save an average of £525 extra per month.
The table below gives a rough estimate of how much additional saving is required on average to cover rental costs throughout retirement (assuming there are no additional savings).
|Years until retirement||Additional Saving required||Additional years required to work|
|5 years||£540 per month (£6,470 per year)||1.7 years|
|10 years||£533 per month (£6,400 per year)||3.6 years|
|15 years||£525 per month (£6,300 per year)||5.1 years|
- Find out more: planning for retirement at different ages.
Overall retirees in the UK can expect roughly 42% of their income, on average, to go towards rental costs.
London and the East of England are predicted to be the most expensive regions to rent with 80% and 45% of retirement income required to cover rental costs.
Wales came out as the cheapest region with rental costs adding up to 24% of retirement income.
What about my state pension?
The Organisation for Economic Co-Operation (OECD) recently published a report investigating the different pension systems around the world.
The UK was found to have the lowest state pension provision of any developed country. Overall, the average full-time worker can expect to receive around 29% of their salary as income in retirement through state pension and other benefits.
This compares to an average of 63% in other OECD countries and more than 80% in Italy and the Netherlands.
The UK population is ageing quickly with today’s over 65 population projected to increase from 30 in every 100 people to 48 in every 100 people by 2050.
Poverty levels among pensioners in the UK rose to 16% last year – leaving one in six (1.9 million) pensioners struggling to make ends meet.
- Find out more: how much state pension will I get?
What can I do?
Planning for retirement is crucial at all stages of your life. The earlier you start, the longer you’ll give yourself to build a sustainable source of income.The two main things to consider are:-
- How much will I need in retirement?
- How much will I need to save in advance to deliver that level of income?
Find out how real people have planned to get the most out of their money in retirement in our short video.
For more useful tips, take a look at our comprehensive pensions guide.