Our ageing population and the decline in birth rate naturally increases the proportion of individuals in retirement and reduces the working population. One impact this has is a higher cost of providing a state pension, as there are less national insurance contributions from the working population to fund it.

As recorded by the Office of National Statistics:

  • A newborn baby boy could expect to live 79.1 years and a newborn baby girl 82.8 years if mortality rates remain the same as they were in the UK in 2013–2015 throughout their lives;
  • Life expectancy at birth has increased by 13.1 weeks per year on average since 1980–1982 for males and 9.5 weeks per year on average for females in the UK;
  • In 2013–2015 a man in the UK aged 65 had an average further 18.5 years of life remaining and a woman 20.9 years;
  • The most common age at death in the UK for men was 85 and for women was 89.

The demographic trends of the increase in retired individuals as a proportion of the total population and rises in average life expectancy result in State Pension payments to more people, for longer periods.

A review of the state pension age is due in May 2017. Two reports were published last month to help with this review; The Government Actuary’s Department report and The John Cridland report.

In his report, Mr Cridland’s recommendations include the following for consideration:

  • State Pension age should rise to 68 between 2037 and 2039;
  • State Pension age should not increase more than 1 year in any 10-year period, if there are no exceptional changes to the data used;
  • that all employers should have elder care policies in place which set out a basic care offer that people should be able to access.

The government is committed to maintaining a fair State Pension for all generations and providing 10 years’ notice of any changes to the State Pensions age. However, with that said, the majority of the UK population would not be able to maintain their current or preferred standard of living in retirement without substantial private pension provision.

It is key to consider how many years of retirement a pension pot needs to fund once the preferred retirement age of, for example 65 has been reached.

Retirement planning is essential in ensuring future financial needs and goals are achieved. The earlier this vital piece of assessment and planning is first carried out, the more chance you have on staying on track to achieving your targets.

 

In Aegon’s UK Readiness Report published in May 2015, the following statistics were realised:

  • Only 16% of people felt ‘very confident’ about being able to retire at their target retirement age;
  • Just 7% of the UK population were on track for the retirement they wanted;
  • 61% of women said they’d never checked the performance of their retirement savings versus 48% of men.

 

At Moorland Mayfair, our goal is to compose a retirement plan that is bespoke to your financial goals to help you achieve your targets for a comfortable retirement.

 

Anna Cuming of Moorland Mayfair Wealth Management

Anna Cuming

3 April 2017