Pensions warning issued as number of people living to 100 and beyond soars
A dramatic increase in the number of individuals reaching 100 years and beyond has sparked a warning that employees must significantly enhance their pension savings or face the risk of running out of money. The UK's centenarian population has doubled over the last 20 years to nearly 15,000 and is projected to surge to almost 400,000 within the next century, as per research conducted by the Office for National Statistics (ONS).
Now investment specialists at Hargreaves Lansdown and Aviva are advising workers to consider the possibility that they may need to ensure their pension savings are sufficient to fund their retirement. According to ONS data, there were 14,850 centenarians (individuals aged 100 or older) in England and Wales last year, marking a 104 percent increase from the 7,270 recorded in 2023.
At the same time, approximately 1,088,670 individuals are over the age of 90, indicating that the number of centenarians is likely to continue its sharp upward trajectory in the forthcoming decades due to improvements in diet, overall health, and medical treatments. While women constitute the majority of current centenarians, the gap between the number of women and men living past 100 is narrowing.
Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, commented: "Our King is going to get a lot busier writing birthday cards to those people that live to see their 100th birthday. Women are miles ahead in the race for long life, 12,130 centenarians, compared to just 2,720 men. But men are catching up. There are still just over twice as many women as men over the age of 90, but the gap has been closing – in 2002 there were three times as many women as men over 90."
She stated that while living to an old age will be the goal for millions of Britons, "increased life expectancy brings serious retirement planning challenges. Living longer means we need bigger pension pots, and with many people exiting the workforce in their mid-60s they could spend over 30 years in retirement."
"Unfortunately, the nation is already under-saving with the most recent data from HL's Savings and Resilience Barometer showing only 38 percent of households are on track for a moderate retirement. It's not just how we build up our pension that matters we also need to give serious thought to how we draw down that income in retirement to make sure it lasts. Recent FCA Retirement Income Market data showed over 225,000 income drawdown pots had a withdrawal rate of over 8 percent in a year.
"While you may need to make larger withdrawals for ad-hoc reasons such as home renovations or a holiday, taking too much out over a long time period will run down your pension and leave you short of money. Someone withdrawing 8% per year from a £200,000 pension could see their pot exhausted by their mid-80s (assuming investment growth of 5 percent per annum and fees of 1 percent a year."
Ms Stinton commented: "You also need to consider the impact of inflation over a long time period - prices will rise and your income needs to rise with it if you are to maintain your standard of living. However, the same FCA data shows over 80 percent of annuities purchased are level, which means that their income won't rise with inflation and their spending power will dramatically decrease over the term of their retirement."
"Our longer lifespans should prove food for thought for our new Government as it embarks on a big review of the UK pension system. The issue of pension adequacy will be a major issue, alongside ensuring the pension system delivers the long-term certainty people need to save for retirement with confidence."
Alistair McQueen, head of savings & retirement at Aviva, emphasised the need for people to bolster their pension pots to ensure a comfortable old age.
He stated: "It is estimated that about one-in-five girls born today could live to 100, and about one-in-seven boys. This has the potential to increase the population of centenarians to over 400,000 over the next century."
Our King is going to get a lot busier writing birthday cards to those people that live to see their 100th birthday.
"Four hundred thousand is more than the current population of Cardiff or Coventry."
He further stated: "Our longer later life is to be celebrated but it also has to be prepared for. There are a record number of people saving for their retirement today 22 million. This is good news. But government estimate that about four-in-ten people are under-saving for their retirement."
Aviva proposes these three retirement saving guidelines:.
* The 40-year rule: Aim to start saving for your retirement at least forty years before your target retirement age.
* The 12 percent rule: Aim to save at least 12% of your salary in your pension, and remember this can include money from your employer.
* The ten-times rule: Aim to accumulate at least ten-times your salary in your pension fund by the time you reach retirement.