People who live until they are 100 may need £638,000 in savings to pay for their retirement – and ever more people are living to this age.
Researchers at Evelyn Partners found those who have worked in white collar jobs and had a healthy lifestyle may live well into their 80s, 90s or beyond.
Lucie Spencer, director in Financial Planning at the group, said: “Even someone waiting until the state pension age of 67 to retire could quite easily need 25 years of pension income.
“And this is a crucial matter, as obviously no one wants to spend their later years in strained financial circumstances or in ill health.
“And while the latter is partially out of our control, it’s not entirely unrelated to financial security and the comfort – both physical and mental – that sufficient savings can provide.”
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The number of people aged 100 and over hit a record high in 2021, reaching 13,925, with the count more than doubling since 1991.
Ms Spencer said people should consider that their costs may increase over their retirement. She said: “While some outgoings might moderate in the later phase of retirement, others such as care, medical and heating costs could place a greater demand on incomes.
“We would encourage the young and middle-aged workers of today to think carefully about the prospect of living well into their nineties.”
The group based its calculations on figures from the Pensions and Lifetime Savings Association.
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The association states that a single person needs £37,300 a year for a comfortable standard of living in retirement while a couple need £54,500 a year.
Ms Spencer said: “Today’s workers need to take personal saving towards retirement very seriously, if they are not to risk a big drop in their standard of living – particularly given the ongoing uncertainty over the affordability of the state pension and triple lock in their current form.
“If we look at an annuity to provide that ‘comfortable’ level of income, then recent quotes are coming in at about £443,000 for a single life, good health annuity at age 67 that increases at two percent per annum but with no other guarantees – which means a pot of £591,000 if the tax-free lump sum was taken in full.
“This reflects the greater value that lifetime annuities can provide for those who live well beyond average life expectancy.”
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Another issue is how much inflation could hike the rising costs of retirement. Evelyn Partners based its figures on a two percent rise in inflation each year in line with the Bank of England target but it could be higher.
Ms Spencer added: “It’s widely suspected that the rate could remain above that in the medium and even the long term, so that drawdown pots risk being depleted more rapidly unless investment returns can compensate.
“Moreover, the rate of inflation for those aged 80+ is likely to be higher than the average due to the make-up of the basket of goods and services that they tend to consume.
“Increases in care home fees and heating costs, for instance, tend to have a higher impact on people over age 80.”
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