The cost of living longer

The Times has run an article based on forecasts that by the 2050s there will be a three-fold increase in the number of us living to age 100 and beyond. In 2020, there were more than 15,000 centenarians according to the Office for National Statistics, and  it expects there to be 51,000 by 2050. This means that people currently in their 60s and 70s may have significantly longer life expectancies, setting aside the current “COVID blip”. This will have an impact on advisers giving advice to upcoming retirees and how long they run their cashflow models to.

The Times has had some number’s crunched by Interactive Investor (ii) based upon the Pensions and Lifetime Savings Association's (PLSA’s) Retirement Living Standards; moderate standard of living; £23,300 p.a. net requiring £25,983 gross and allowing for the income to be withdrawn monthly, increasing at 2% p.a. with fund-growth of 5% p.a. net of charges. It is assumed the individual is entitled to the full State Pension of £10,600 p.a. This results in the following fund values for a 65-year-old living to:

• Age 84 would require a starting fund value of £212,000
• Age 85 would require a starting fund value of £220,000
• Age 86 would require a starting fund value of £229,000
• Age 87 would require a starting fund value of £237,000
• Age 88 would require a starting fund value of £245,000
• Age 89 would require a starting fund value of £253,000
• Age 90 would require a starting fund value of £260,000
• Age 91 would require a starting fund value of £268,000
• Age 92 would require a starting fund value of £275,000
• Age 93 would require a starting fund value of £281,000
• Age 94 would require a starting fund value of £288,000
• Age 95 would require a starting fund value of £296,000
• Age 96 would require a starting fund value of £301,000
• Age 97 would require a starting fund value of £307,000
• Age 98 would require a starting fund value of £313,000
• Age 99 would require a starting fund value of £319,000
• Age 100 would require a starting fund value of £324,000

So, someone expecting to live to 100, compared to the current average life expectancy would need around a further 54% in their starting value of their drawdown fund.

It is worth remembering that the Retirement Living Standards, assume the pensioner(s) own their home and are not paying rent or mortgage costs.

At The Private Office we use cash flow modelling to map out our clients’ financial futures and explore different scenarios, including how different retirement ages can impact the lifestyle able to be achieved in later life.

The information in the article is correct as at 21/09/2023.

Please note: The Financial Conduct Authority (FCA) does not regulate cash flow planning.