As the number of centenarians in England and Wales has more than doubled since 2003, pension savers are warned there is possibilities of running down their pension funds.
While increased longevity is a positive development, it presents significant challenges for retirement planning.
The number of centenarians in England and Wales has more than doubled since 2003, reaching 14,850 last year, according to the latest data from the Office for National Statistics.
This significant increase highlights the growing trend of people living well past 100 years old.
Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown said: "Living longer means we need bigger pension pots, and with many people exiting the workforce in their mid-60s they could spend over 30 years in retirement."
This extended retirement period requires careful financial preparation. However, recent data from the Financial Conduct Authority raises concerns about pension sustainability.
This extended retirement period requires careful financial preparation
GETTYOver 225,000 income drawdown pots had a withdrawal rate exceeding eight per cent in a year.
Stinton warned: "Taking too much out over a long time period will run down your pension and leave you short of money. Someone withdrawing eight per cent per year from a £200,000 pension could see their pot exhausted by their mid-80s."
Additionally, the impact of inflation on retirement income is a critical consideration, with over 80 per cent of purchased annuities being level, meaning their value will decrease over time.
The retirement savings gap in the UK is significant, with recent research by Hargreaves Lansdown revealing alarming statistics. Only 38 per cent of households are on track for a moderate income in retirement, leaving a majority unprepared.
According to the platform's Savings and Resilience Barometer, a single person now needs £25,000 annually for a moderate retirement, while couples require £36,480.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, stated: "Even adopting a smaller increase exposes the huge challenges people face in planning for retirement."
The study found that 12.2 million households lack sufficient pension savings for a moderate living standard in retirement.
However, nearly 7 million of these have excess cash or investments that could boost their pensions or SIPPs.
Morrissey added: "It's a simple shift that could see 1.8m households passing the threshold for a moderate retirement income and securing their financial future."
To address the retirement savings gap, experts are calling for government reforms and individual action.
The anticipated auto-enrolment extension bill is seen as a key initiative, allowing individuals to enrol from age 18 and contribute from their first pound earned.
Hargreaves Lansdown suggests encouraging employers to increase pension contributions, potentially by matching increased employee contributions above the minimum required.
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For the self-employed, who often avoid traditional pensions, reforms to the Lifetime ISA are proposed.
These include lowering the early access penalty from 25 per cent to 20 per cent and extending the upper age limit for contributions from 40 to 55.
Morrissey emphasised the importance of these changes and said: "These reforms could significantly aid those who become self-employed later in life, providing them an additional tool to prepare for retirement."
As life expectancy increases, these measures aim to help more Britons achieve financial security in their later years.
