£240,000 extra pension wealth needed for a 100-year life
interactive investor calculates the difference life expectancy can make to your pension needs.
4th September 2023 12:17
by Alice Guy from interactive investor
Interactive investor calculations show that someone living until age 100 could need an extra £240,000 pension wealth to give them a comfortable retirement, compared to someone who lives until 84 years old, the current life expectancy for men at 65, according to ONS figures. Likewise, someone retiring and drawing enough for a moderate retirement could need an extra £112,000 pension wealth, compared to someone who lives until 84 years old.
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Calculations are based on the 2022 PLSA Retirement Living Standards, which find single pensioners need a private pension income of £15,383 for a moderate retirement and £32,882 for a comfortable retirement, assuming they have a full state pension. Interactive investor calculations are based on someone retiring at 66 and using income drawdown to take this income from their pension pot (PLSA data showing gross private pension income needed is linked under “DC pot size and income tax” on this page).
Age someone lives to | Time in retirement | Pension pot needed for moderate retirement | Pension pot needed for comfortable retirement |
84 | 18 years | £212,000 | £452,000 |
85 | 19 years | £220,000 | £471,000 |
86 | 20 years | £229,000 | £489,000 |
87 | 21 years | £237,000 | £506,000 |
88 | 22 years | £245,000 | £523,000 |
89 | 23 years | £253,000 | £540,000 |
90 | 24 years | £260,000 | £556,000 |
91 | 25 years | £268,000 | £571,000 |
92 | 26 years | £275,000 | £586,000 |
93 | 27 years | £281,000 | £601,000 |
94 | 28 years | £288,000 | £615,000 |
95 | 29 years | £295,000 | £629,000 |
96 | 30 years | £301,000 | £642,000 |
97 | 31 years | £307,000 | £655,000 |
98 | 32 years | £313,000 | £668,000 |
99 | 33 years | £319,000 | £680,000 |
100 | 34 years | £324,000 | £692,000 |
Extra needed for a 100-year life | £112,000 | £240,000 | |
Sources and assumptions: PLSA Retirement Living Standards, income drawdown based on 5% investment growth net of fees, income withdrawn increases by 2% each year, ii income drawdown calculator.
Alice Guy, Head of Pensions and Savings, interactive investor says: “With more of us living for longer, it’s difficult to know how long our pension needs to last. Live until you’re 100 and you could need, £240,000 more than if you lived until 84 years old. And running out of money could mean relying on just the state pension, which will only be enough for a no-frills, frugal retirement.
“The average life expectancy for a 65-year-old is currently 84 for men and 87 for women, meaning that men will need their pension pot to last 18 years on average, while women will need their pension three years longer, so 21 years on average. But these figures are only averages. In fact, there are currently more than 600,000 people aged over 90 in the UK, and this figure is expected to grow in the future.
“Many of us assume that we’re going to spend less as we get older, but that’s not necessarily true. Most pensioners want to enjoy holidays and eating out in retirement, and it can be expensive to maintain your home in retirement with maintenance and insurance costs soaring in the last few years.
“It’s important to sit down and work out how much you need for retirement as everyone’s priorities are different. The PLSA figures for a comfortable retirement include three weeks abroad each year, and changing cars every five years, whereas their figures for a moderate retirement include two weeks abroad and a UK weekend away, plus changing cars every 10 years.
“Younger people have an even greater life expectancy on average than those currently in retirement. Modern advances in medicine and healthcare mean that life expectancies are gradually increasing and the average life expectancy for babies born today is expected to be 87 for boys and 90 for girls, meaning that young people will need to save more on average for a comfortable retirement than current retirees.”
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