30 is the new 20: Planning for a longer retirement


As science and medicine progress, the human life is getting longer. That means, even though retirement age is gradually increasing, the time between   finishing work and dying is getting longer.

Research from Aegon has shown that 140,000 current 40-year olds will live to see their 100th birthday. If those people were to enter retirement at their State  Pension Age (67), their plans will need to accommodate an income which will last for more than 30 years; and potentially even 40!

Further research has shown that, if today’s 40-year olds make no changes to their retirement saving habits, they could face a shortfall of £250,000 compared  to the average amount needed to support their lifestyle when they finish working.

Breaking the habit

No matter your age, it is not too late to turn your retirement plans around and start working toward an income which will be enough to pay for the lifestyle you want when you finish work.

There are several factors to consider when planning for a longer retirement, including;

1. Life expectancy

You might not want to think about it, but how long you will live will have a big impact on your retirement finances. You will need an agile plan which can be adapted to suit your needs, whether you are retired for as long as expected, or if life has other plans for you.

There are many tools available to estimate your life expectancy, which can be affected by numerous things including your gender, location and occupation. However, reality could be very different from expectation, so you will need to have a back-up plan in place just in case your retirement is shorter than planned, in which case you need to decide where your assets will go. Equally, if you are retired for longer than expected, your money will need to stretch further, and that will need to form part of your financial plan.

2. The cost of care

Many people assume that the cost of living decreases during retirement. However, the average cost of care is now between £250 and £1,000 per week, depending on the type of care needed. That will need to be factored into your retirement finances.

While some state assistance is available to help with the costs of care, you will need to consider whether the type of care available through those means are suitable for your needs and will provide the lifestyle you want in later life. If not, you will need to make sure you can afford the extra costs.

3. Your goals 

Before you can begin planning, you need to know what you are working toward. The lifestyle you want to lead in retirement will signify how much money you will need to support it. However, you will also need to factor inflation into this. Over the coming years and decades, the cost of living is not going to stay the same. It is therefore necessary to ensure that your retirement finances will be able to support increased expenses.

Working out how much you will need in retirement can be complicated, so why not let us do the hard work for you?

4. Your current position

Once you know what you are working toward, it’s time to look at what you are starting with. This will include the State Pension and any pension contributions you have made so far.

Your State Pension entitlement will depend on the number of qualifying years you have on your National Insurance record. You can see how many you currently have by checking your record here.

To qualify for the full New State pension, you will need 35 qualifying years on your record, these are years where you have:

  • Made contributions through your earnings as an employee
  • Made voluntary contributions directly to HM Revenue & Customs
  • Been awarded National Insurance Credits, which are given as part of some State Benefits.

5. Your family

If you are married or in a long-term relationship, it is important to make retirement plans as a couple and factor each other’s feelings into any decisions you need to make. Furthermore, by combining your retirement incomes, you may be able to afford more than originally thought.

Research from Prudential has shown that a majority of couples have not discussed their retirement plans, and more than a fifth do not know what their partner earns. We have covered this in more detail here.

If you are planning to leave a legacy behind for your loved ones, you will need to plan for it. That will involve writing a will and updating any expression of wish forms.

6. Products

The products you use to build your retirement income will affect the plans you can make for later life. For example, using a Workplace Pension will mean that any money remaining in the fund can be passed onto your beneficiaries with no Inheritance Tax liability, which may affect the plans you make around leaving a legacy behind.

Three key tips for maximising your retirement income

  • Maximise your State Pension
  • If you are eligible, make sure you are enrolled in, and contributing as much as possible into, a Workplace Pension
  • Talk to a financial adviser

The value of advice

Research from Unbiased has shown that those who take advice while planning for retirement could put an extra £98 per month toward their retirement fund, which could result in an additional £3,654 per year in retirement income.

To get started please contact Sarah or Bev on 0115 933 8433.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. Your pension income could also be affected the interest rates at the time you take your benefits.