A general increase in life expectancy and health improvements in the UK is affecting how long people now expect to live, according to a recent nationwide study by life assurer AIG.

The research found that, on average, people expected to reach around age 82 and remain healthy and active until around 77 years old. Nearly one in five (18%) believe they will live past 90. Those closest to hitting retirement, the over-55s, were the most confident about retiring later.

In comparison, latest Office for National Statistics figures estimate the average life expectancy of a male born between 2015 and 2017 in the UK as 79.2 years, and a female as 82.9 years.

Clients of financial advice firms are expected to live beyond the average life expectancy because they tend to be wealthier; having sufficient wealth enables us to enjoy a healthier lifestyle, financial advice and long-term care if needed. These important factors can reduce worry and stress, which are recorded as big contributors to shortening longevity.

How we live in retirement

Another change is how people perceive their retirement will be, with 31% of those surveyed said they expected to be physically capable of doing their jobs into their 70s, with one in 14 confident they could continue to work beyond their 80th birthday.

This, in turn, is influencing people’s perception of how long retirement should be. Almost half of those surveyed (47%) believed the current average of 21 years spent in retirement is the right amount of time, although one in seven (14%) felt it was too long, with this number rising to 28% among Londoners and dropping to as low as 8% among those living in the North East. On the other hand, one in four felt 21 years was not long enough.

Financial planning issues

There are four significant financial planning issues which arise from longer retirements:

 1 Ensuring enough wealth is accumulated pre-retirement to last beyond our expected lifetime – as our longevity is unknown and we don’t want to run out of money when we may need it most.

 2 Looking at the best method to generate retirement income and tax efficiently, over what could be a period of 30-40 years.

 3 Considering whether to move straight into retirement or to transition into it over a number of years - if the type of employment allows for it - thereby extending our income generating capability and further payments into our pension benefitting further from tax relief.

 4 Living longer increases the chance that in at least some of our later life we will be in ill health; planning for this and long-term care is essential.

The AIG research further concluded that children born today could, in many cases expect to live to see their 100th birthday. Planning for this potential eventuality should be something which happens at an intergenerational level.

Many people simply misjudge their own longevity, this can be extremely risky when coupled with the greater flexibility and access to funds that pension freedoms give. This skewed lens through which many of us view life expectancy is also likely to be reflected in saving and spending habits over our lifetime. We are more likely to spend more and save less if we think we have less time to enjoy it. As people now have the opportunity to access their pension pots early, this can spell disaster during the later retirement years if savings have been exhausted.

One of the most important elements of retirement planning is factoring in expected longevity to ensure we can enjoy our accumulated wealth throughout our lifetime. Lowes clients benefit from both a structured approach to creating wealth as well as sophisticated research tools that can help map income requirements and potential use of capital in retirement years against different levels of return on investments. We can then project this information against differing longevity periods.

The crux of the matter is, nobody knows how long we are going to live, so there is a greater need for an adaptable retirement plan. In the age of longevity there are a myriad of options available to suit a range of needs. For expert guidance on how to plan your retirement, arrange a free, initial consultation with a Lowes Consultant:

Call: 0191 281 8811

Email: enquiry@Lowes.co.uk