What this means for retirement planning
As the life expectancy for both men and women rises, so naturally, does the state pension age. This provokes thought in how to fund a longer retirement to a good standard of living. Increases in life expectancy have also, over the years, resulted in changes to pension products so a change in mindset is also required. The younger generation of workers are particularly in need of forward planning for retirement.
State pension age could be 70 by 2050
According to research by the Office of National Statistics (ONS), boys born in 2010-2012 are likely to live until age 79 and girls until 83. In addition, one in five boys and three in ten girls could live past 90. The data shows that in the past 100 years, life expectancy at birth in England & Wales has increased by almost three years per decade.
The research is generally carried out to assist official decision making such as the setting of the state retirement age, risk assessment around life assurance and pension liability.
This data has encouraged economists and financial experts to predict that the state pension age could reach 70 by 2050.
Whilst it is impossible to predict the future, trend analysis shows that a life expectancy over 90 is highly probable in the second half of this century.
Protecting yourself in retirement
Living longer and working longer brings change to retirement plans.
Pension products have changed significantly over the past ten years according to market requirements.
Final salary pensions are rare now for new employees in the private sector and it really is just the current generation of retirees that are benefiting from products such as these, as well as defined benefit pensions.
Defined contribution pensions are more common place, with employers and employees jointly contributing to a pension pot. Savers are however, forced now to rely on stock market performance with their pension growth, which can be concerning for the more cautious investor.
Forward planning should be considered to maximise savings and ensure a sufficient level of income to support a longer life in retirement.