Healthy life expectancy in decline: 5 ways to protect your pension

The number of years that people can expect to spend in good health has fallen to a new low, according to government data. 

This has huge implications for people's retirement planning, as it means you may not be able to work for as long as you need to build up a sufficient pension.

Here, we look at what you can do to futureproof your retirement income.

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Healthy life expectancy hits record low

The Office for National Statistics (ONS) defines healthy life expectancy as an estimate of lifetime spent in ‘very good’ or ‘good’ health, based on how individuals perceive their general health. 

While overall life expectancy continues to rise slowly, healthy life expectancy has fallen to its lowest level since the statistics were first collected in 2011-13.

In 2022-24, men in the UK could expect to spend 60.7 years in good general health, compared to 60.9 years for women.

These numbers have fallen by 1.8 and 2.5 years, respectively, compared with the data for 2019-2021.

England still has the highest healthy life expectancy at birth among UK nations for both men (60.9 years) and women (61.3 years). Meanwhile, Scotland had the lowest for men (59.1 years) and Wales had the lowest for women (58.5 years).

Here are five things you should consider to prevent your retirement savings falling short due to health reasons:

1. Start saving as early as you can

Poor health can have a significant impact on our ability to keep on working and therefore build up an adequate fund for our retirement. That’s why starting to save early is vital. 

Employees are automatically enrolled into a workplace pension from the age of 22. 

It may be tempting for younger workers to opt out or delay retirement planning because it feels too distant. But waiting until your 40s or 50s to think about retirement can prove costly.

Our calculations show you’d need total monthly contributions of £423 to achieve the 'moderate' retirement living standard of £31,700 a year via pension drawdown if you start saving at age 30. Start at 50 and the required monthly contribution soars to £1,216.

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• Find out more: how much will I need to retire?

2. Build up a meaningful pension pot while you can

The prospect of ill health at a relatively young age puts people in the difficult position of ending up with a smaller pension because their working lives are shorter, but needing it to last for longer.

Wherever possible, try to boost your pension contributions as and when you can afford it – for instance, when you get a pay rise.

Calculations by Standard Life show that an employee who increases their contributions from 5% of their salary to 7% at the age of 22 could end up with a pot worth an extra £52,000 (adjusted for inflation) by the age of 68. 

Even if you can't commit to increasing your regular contributions, think about making extra one-off contributions from time to time – for example, if you get a bonus.

• Find out more: how to boost your pension

3. Maximise your state pension

The state pension age is rising to 67 in the next year, so it won’t necessarily fill the gap if you have to stop working at a relatively young age.

When you do qualify for the state pension, you should ensure that you get the most from it to supplement the private pension savings you have built up during your working life. 

To receive the full level of state pension of £241.30 a week in 2026-27, you'll need 35 years' worth of National Insurance (NI) contributions and 10 years to get anything at all.

A state pension forecast will give you an estimate of how much you could get – and when you'll qualify. It will also highlight any gaps in your NI record that could stop you from getting the full amount.

If you have any gaps in your NI record (years where you didn’t pay National Insurance or qualify for NI credits), you can top up your state pension by buying voluntary NI credits.

• Find out more: how much is the state pension?

4. Consider an enhanced annuity

The earliest you can take money from your defined contribution pension is when you reach age 55 (rising to 57 in 2028). 

One way to do this is to buy an annuity, which involves swapping some or all of your retirement savings for regular guaranteed payments that last for the rest of your life.

If you are in poor health, you could benefit from a higher annuity rate.

Providers offer 'enhanced annuities' to people in poor health or with lifestyle conditions that mean they might die earlier. If you qualify, you can increase your annuity income by as much as 20-30%.

• Find out more: annuities explained

5. Consider equity release

Borrowing via equity release might be a good option if you are ‘property rich’, but unable to build up enough private pension to last throughout your retirement. 

Lifetime mortgages are the most popular type of equity release. You take out a loan against your property, which is repaid from the proceeds when it is sold. 

The amount you can borrow depends on your age and how much your home is worth. You'll need to be at least 55, but the older you are, the more you can borrow.

Equity release can be attractive, especially if you want to bolster your retirement savings without moving home, but it's an expensive, lifetime commitment that's not right for everyone.

• Find out more: how equity release works