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Is your pension as healthy as you are?

Date: 07 February 2024

If you live to 100 rather than 80, you will need double the amount of pension savings.

It’s generally agreed that we are all living longer. A man who’s currently 65 is expected to live to age 83, and a woman is expected to live to age 86. But the number of centenarians living in England and Wales is at a record high with 13,924 people aged 100 or older in 2021, according to the Office for National Statistics.

Our calculations show that retirees who end up living until they are 100 will need double the amount of pension savings compared to those who live until they are 80.

Want to enjoy a moderate* lifestyle in retirement? Here’s what you’ll need:

  For the pension pot to last…
…until age 80 ...until age 100
Size of pension pot needed at 66 years, after tax-free cash is taken £155,000 £315,000

Remember that the value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

*This means having one foreign holiday a year and eating out a few times a month, according to the Pensions and Lifetime Savings Association

Chris Flower, Chartered Financial Planner at Quilter Financial Advisers, explains the things you need to consider when working out how long your pensions savings need to last:

  • What age do I hope to retire by?
    The age at which you retire affects how long your savings must last. Your pension potentially may need to meet your retirement income needs for up to 30-40 years.
  • Should I access your private pension when you claim your UK State Pension?
    Not necessarily. Most people now need to wait until they are 66 or 67 to claim the UK State Pension. Working even a few years more can have a notable impact on your private pension’s growth and the kind of income you can expect to have.
  • How much will I need to spend each month and year?
    It's important to be realistic and to include contingencies for unexpected costs.
  • What might the state of the economy be when I retire?
    While it's hard to predict, the economy can also affect your pension's buying power. Inflation, interest rates, and market conditions all play a part. If you're retiring in a period of economic downturn, it may be wise to be more conservative with withdrawals, at least initially.

The 4% rule

The "4% rule" has long been a figure cited by research in the US as something that is sustainable for most people. It suggests that if you withdraw 4% of your pension pot in the first year and adjust this amount each year for inflation, your savings should last for 30 years.

However, like all rules of thumb, it's based on certain assumptions. You need to bear in mind your state of health and your propensity to spend - this is likely to be higher the younger you are and lower the older you are.

You also need to bear in mind your attitude to risk and capacity for loss.

Talk to a financial adviser

For something as important as retirement planning, it pays to get expert advice. After all, you don’t want to leave things to chance. Quilter Financial Advisers can help. Our nationwide team of experienced advisers can help you wherever you are on your financial journey, offering tailored financial advice with exceptional service.

Book a free initial consultation just email or call 0800 849 1279