The number of people aged over 100 rose by a fifth in 2020. What does this mean for financial planning? Rosie Hooper, chartered financial planner at Quilter comments.
New ONS statistics show that the number of centenarians in the UK rose to its highest ever level in 2020, reaching 15,120, an increase of almost a fifth from last year. There are lots of factors, which have caused this including massive improvements in health care and spikes in the number of births after the end of World War One. The population of people aged over 90 has grown also in 2020 but at a much slower rate than the 3.6% in 2019.
Although some statistics show that life expectancy is starting to plateau in its growth, we should not be under the illusion that we are going to start seeing a drastic decline in how long most live. Other ONS statistics, show that life expectancy at age 65 was 18.5 years for males and 21.0 years for females, which represents a long period of time to fund without an income. These estimates are very similar to those for 2015 to 2017 and with only a slight decline of 1.0 weeks for males and an increase of 3.1 weeks for females. Therefore, don’t be fooled by the drop in life expectancy, as there is still a good chance you will need the money well into your 80s if not longer.
In fact, life expectancy tends to increase in bursts rather than in a linear fashion, with the bursts corresponding to medical breakthroughs. What this means is that everyone should plan their retirement around the very realistic possibility of living to 100. Building up a pension pot that can last this long is no easy feat and will be much easier if someone starts early. Auto-enrolment means many more younger people are contributing to a pension but at the current default contribution levels some will still not build up the pots they need to fund an increasingly longer life.
It’s important to remember it’s never too late to save for retirement. For anyone fortunate enough to have their employer make contributions to their pension plan, along with favourable tax treatment and potential for investment growth, any pension contributions made in later life can still have a big impact on their standard of living in retirement.
