Rise of the ‘no desire to retire’ generation
IF YOU are 70 years old then a hearty congratulations, because last week official data decreed you are actually five years younger than you thought you were.
An Office for National Statistics report said that as people live longer, we should now measure ageing in terms of remaining life expectancy instead of years lived. On that measure, we are all younger.
Its report, Living Longer: Is Age 70 The New Age 65?, said that while 65 has traditionally been seen as the start of old age because that was when men could start drawing their state pension, this no longer applies today.
The state pension age is rising to 66 and beyond, while growing numbers of people now carry on working into their late 60s and 70s.
Greater longevity presents another challenge in that those extra five years in retirement have to be paid for. So can your pension last as long as you now do?
TOO LITTLE
At the age of 65, the average man has more than 18 years to live, roughly a fifth of his life, while women have another 21 years, or a quarter.
That means you need to build enough pension to last you for two decades, on top of whatever the state provides, and that is quite a challenge given today’s low savings and annuity rates.
Too many are not saving enough for this brave new world where everyone feels five years younger, with 36 per cent of women and 30 per cent of men over 50 falling short, according to research from Sunlife.
It said too many are leaving things to chance by relying on a partner or a spouse’s pension or hoping for an inheritance.
Marketing director Simon Stanney said downsizing is an option but most older people are reluctant to give up their homes: “Equity release is another solution, as you can release some of the money tied up in your home without having to move.”
ANNUITY SHOCK
Even if you do save a hefty sum, it may buy you less retirement income than you think.
At age 65, each £100,000 in your pension currently buys a single life annuity worth just £5,092 a year, Hargreaves Lansdown figures show.
That falls to a starting income of just £3,462 if you want it to rise by 3 per cent a year, to keep up with prices.
No wonder growing numbers shun annuities and leave their pension invested in the stock market through drawdown.
Andrew Tully, technical director at pensions specialist Canada Life, said with longer retirements it makes sense to retain exposure to the stock market, to help your pot grow: “You could take out an annuity to cover your basic spending and leave the rest in a flexible drawdown plan.”
WORKING ON
As we are living longer, more of us plan to work longer as well.about 45 per cent expect to plough on into their 70s and one in 10 into their 80s, research from Fidelity International shows. Maike Currie, director for workplace investing, said the “No desire to retire” generation are transforming the world of work: “Many now aim for a phased retirement, although that should always remain a choice, rather than a necessity.”
They should still max out their pension savings, especially those in a workplace scheme with employer contributions.
She said:“many companies will match what you are paying, up to a certain level, so make the most of it.”
Teacher and lecturer Mark Cottle, 66, plans to carry on working into his 70s but said this is hardly a new concept. “My great uncle ran a sheep farm in Australia aged 92,” he said.
Mark, who lives in Chudleigh, Devon, lectured on both history and management development and plans to keep going now he has “retired”. He now does leadership training for councils and private companies and is an accredited lecturer for The Arts Society: “I’ve signed up to travel around Australia on a month-long lecture tour, in 2021.”
He loves doing something he feels he is good at and his latest roles have given him “a fresh bite of the apple in retirement”.
“I plan to continue for as long as my health and energy keep up,” Mark said, and these days he is far from a lone voice.
BACK-UP PLAN
Hargreaves Lansdown personal finance analyst Sarah Coles said while people are living longer, we are not necessarily healthier. It is hard to feel 65 if you are 70 and struggling with medical problems, or spend hours caring for a sick or elderly relative. “You might well reach your 70s in as great shape as Meryl Streep or Caitlyn Jenner but there’s no way you want to rely on it,” he said.
So do not bank on being able to work for ever, and build enough savings in case you have to retire early. “You also need to plan for care in later life, too, as you cannot rely on the state,” Coles said.
Emma Byron, managing director at Legal & General Retail Retirement Income, said retirement is more varied, flexible and colourful than it used to be but one thing has not changed: “You have to plan for it and should consider taking independent financial advice.”
‘You might well reach your 70s in great shape like Meryl Streep or Caitlyn Jenner but don’t rely on it’