This week HRH Prince Charles turns 65 and officially becomes a pensioner. The future monarch has announced that he will be claiming his state pension and donating it to charity. However for a large proportion of the country, the state pension will form the primary, if not sole, source of income in retirement. Even those who are investing in workplace or private pensions may be failing to make adequate provision for their retirement, or simply do not understand the scale of the problem.
Thanks to healthier lifestyles and advancements in medicine, average life expectancy in the UK has grown significantly over the last half-century from 71 years to 81 years, a 14% rise in life span. People not only live longer but also are able to enjoy active lifestyles well into retirement.*
However this positive trend creates challenges, as the proportion of time we spend in retirement has expanded dramatically. According to OECD estimates, the average life expectancy post-retirement age for men will have increased by 49% from 11.9 years in 1958 to 17.7 years by 2020.**
Longer retirements will require greater financing and it would be wise not to rely solely on State provision. There is a real risk that many people will simply outlive their financial assets. People approaching retirement are often underprepared with how to cope with the gap in these assets and vastly overestimate the standard of living they will have in retirement.
Will you live like the Royle Family or the Royal Family in retirement?
Bestinvest has launched an easy to use Retirement Planning Calculator which allows you to better understand the level of income you will potentially receive in retirement, based on your current level of savings and investments.
* OECD Better Life Index
**OECD: Pensionable Age and Life Expectancy, 1950-2050