For decades it was taken as a given that life expectancy would continue increasing for each generation. However, even prior to the pandemic, life expectancy improvements had ground to a halt, and now the numbers are going backwards.
This undoubtedly reflects the devastating impact of Covid-19 and will make it even more difficult for the next government to attempt to save some cash by hiking the state pension age.
Under current legislation, the state pension age is set to increase to 67 by 2028 and 68 by 2046. However, the previous government stated its intention to bring forward the planned increase to age 68 to 2039, although this was before the pandemic.
Rumours of proposals to accelerate the rise in the state pension age, potentially to age 68 by the 2030s, surfaced again last year, but ministers eventually decided this would be too controversial – particularly before the country goes to the polls in the general election, which is expected to be held later this year – and pushed the decision onto the next government.
Bringing forward the scheduled hike in the state pension age to 68 for millions of Brits would raise billions of pounds for the Treasury, but it would also be deeply unpopular.
While the ageing population continues to place huge strain on the public finances, these latest figures would make it extremely difficult for any government – either now or in the future – to justify a faster increase in the UK state pension age.
Despite these recent falls in UK life expectancy, the number of people reaching their 100th birthday is higher than it has ever been – the number of people aged 100 or more has more than doubled in the past 20 years, with more than 15,000 centenarians living in England and Wales in 2022.
While none of us know exactly when we are going to die, it is important to plan for the possibility your clients’ pensions will need to sustain them for decades in retirement.
In an independent survey commissioned by AJ Bell, savers aged 55 to 59 who had entered ‘drawdown’ on average thought they would live for 21 more years.
In fact, according to official projections from the Office for National Statistics, a healthy 55-year-old man has an average life expectancy of 84 – meaning those in the 55 to 59 cohort could be underestimating life expectancy by up to eight years. A 55-year-old woman can expect to live until age 87 on average.
But many people will of course live well beyond the average. ONS analysis suggests a 55-year-old man has a one in four probability of reaching age 92 and a 4 per cent chance of celebrating their 100th birthday. The equivalent woman has a 1 in 4 chance of reaching age 95 and a 7 per cent chance of celebrating her centenary.
If long-term life expectancy improvements continue, younger generations will become increasingly likely to reach three figures. It is therefore crucial clients save as much as they can afford, as early as possible, by making the most of the various incentives available, including employer contributions and the bonus of pension tax relief.
