Personal Investing
Ed Monk 7 Dec 2017 12:33pm

Don’t base your retirement plan on your parents’ one

Contrary to popular belief, we don’t all turn into our parents. Today’s young people will look and feel very different at older ages than previous generations have
Caption: The Oxford Institute of Population Ageing studied the effects of improving longevity in the UK
They will be healthier for longer and, in aggregate, live to far greater ages. These are the consequence of rising life expectancy, and the trend is well known by now.

Over many decades, improvements in diet and medicine, less gruelling working lives, better employment chances for women and even public health campaigns for things like smoking and seatbelts have all contributed to the rising age profile of our population.

It’s a pattern in train across the developed world and, increasingly, the developing world as well. What’s perhaps underappreciated is the speed of this change, or that its consequences are already with us. Both were revealed in recently published research undertaken by Fidelity.

We commissioned the Oxford Institute of Population Ageing, Oxford University, to establish the effects of improving longevity in the UK.

The research was based on existing official data and included the striking fact that, on average, 45-year-olds will have almost three years longer to live when they retire than today’s 65-year-olds - one of the few examples where Generation X trumps the Baby Boomers.

More specifically, 65-year old women today will live, on average, another 21.4 years, taking the average age at death to 86 and 5 months. Projecting forward to 2036, when today’s 45-year olds will have reached 65, the average age at death for women climbs to 89 - 2 years and 7 months longer.

For men the effect is even more pronounced with average age at death for 65-year-olds climbing to 87 years by 2036, up from 84 years and 1 month today - and extra 2 years and 11 months.

To enjoy those extra years today’s 45-year-old must of course survive until 65, and the research places the likelihood at 93% for women and 90% for men.

Longer lives are to be celebrated, of course, and the Fidelity work also showed that it wasn’t just life spans overall that were growing, but time spent in good health as well. Your longer life won’t just be more time living in infirmity.

Yet the difference in life expectancy between Gen X and the Boomers - two groups that are relatively close in age - should give us pause.

There is already a problem of people underestimating how long they will live. The recent Financial Conduct Authority study into the financial lives of British people found that half of those in the 55-64 age group believe they will be dead by age 80, thereby significantly under-predicting their likely longevity.

This is perhaps understandable. We naturally base our expectations for our future lives on what we see happen to the older people we know - friends, colleagues and family. In terms of financial planning, however, it could be a costly mistake if it means we underestimate how long we’ll live.

All that extra time needs planning and paying for, and at a time when financial support for older people is stretched. It’s why steps like the rise in the state pension age have been deemed necessary, if not universally welcomed.

There is now more freedom than ever for individuals to dictate how they use money set aside for their retirement. As welcome as that freedom may be for some, it has coincided with greatly reduced levels of guaranteed retirement income, be it from the state or private pensions, so there is less protection if and when money runs out. Underestimating how long you’ll live increases the chance of that happening.

Individuals, of course, can help themselves by saving more, making the most of any help from employers and the tax system and planning earlier.

The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at or over the telephone on 0800 138 3944.

Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.

Register for a 10% Personal Investing discount with Fidelity

Important information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.