25th September 2014
The latest official numbers on increased life expectancy in the UK have further highlighted the urgent need for Britons to knuckle down and get saving for life after work.
Data released by the Office for National Statistics (ONS) reported further increases in longevity, with the number of centenarians now up to 13,780.
The numbers show that life expectancy for men has improved by over six hours every day since 1980, highlighting the need to save for our increasingly long retirements.
An average man in the UK will live for more than 18 years after the age of 65, and a woman nearly 21 years, the ONS life expectancy figures show. This figure is expected to increase in the coming years and there are already 710 people in Britain who are aged 105 or more.
Nick Fitzgerald, head of financial planning at wealth manager Brewin Dolphin said: “These figures are terrifying, particularly if you are a reluctant pension saver. How many of us have planned for the future assuming that we will live to 105?”
“George Osborne’s attractive new pension freedoms give all of us the chance to withdraw our pension pot and spend it as we like, but these figures highlight the need to save and budget carefully. Unlike buying an annuity with your pension pot withdrawing it either in chunks or all at once means that it is possible to run out of money completely.
“Savers need to plan for a longer retirement than they think, and they need to take the best advice possible to ensure that their money works for them both at retirement and before. Being a nation of penniless 105 year olds is in nobody’s interests.”
Maike Currie, associate investment director at Fidelity Personal Investing asserted that while most of us underestimate how long we will live for, for many ‘demographic deniers’ ignoring the growth in the population of the oldest, may do well to heed the ONS data.
She said: “These numbers have massive implications for the healthcare system, care needs, retirement housing and pensions. Arguably, one of the biggest hurdles to securing a sufficient income in retirement will be life expectancy. You’re likely to reach an older age than you grandparents, and your parents, and as such your retirement income will need to last for longer.”
Elsewhere the ONS, found that total membership of occupational pension schemes with two or more members – excluding participation in other workplace (group personal) pensions – was estimated to be 27.9m in 2013, marking a 300,000 increase on 2012’s tally. In addition, the numbers contributing, or having contributions paid into a scheme rose slightly from 7.8m in 2012 to 8.1m in 2013. There were increases in active membership for both the private and public sector. Contribution rates to defined benefit schemes or gold-plated final salary schemes remained higher than for defined contribution schemes.
For private sector defined benefit schemes, the average contribution rate was 5.2% of pensionable earnings for employees and 15.4% for employers. For private sector defined contribution schemes, the average contribution rate was just 2.9% for members and 6.1% for employers.
Tom McPhail, head of pensions research at Hargreaves Lansdown said: “A lot of good work has been done on pensions, including auto-enrolment, state pension reform and the Budget freedoms, but they aren’t enough. Looking beyond the next election in 2015, we should already be thinking about Auto Enrolment 2.0 and ways to fix the gaps left by the current reforms. We believe active engagement has to be a critical element of future pensions policy.”
“Many workers currently have just the bare minimum being paid into their pension accounts; a total pension contribution of 2% of their salary. Even when auto-enrolment is fully up and running, many will only have 8% of their salaries being paid into their pension. This is not enough. A savings rate of 12% or more of income towards long term retirement provision is necessary if they are to achieve later life financial security.”