A surge in the number of people living to 100 and beyond has triggered a warning that workers need to dramatically boost pension pots or risk running out of cash.
The number of centenarians in the UK has doubled in the past 20 years to almost 15,000 and is expected to rise to almost 400,000 over the next 100 years, according to research by the Office for National Statistics (ONS).
As a result, investment experts at Hargreaves Lansdown and Aviva suggest workers need to take account of the fact that they may well need to ensure their pension pot nest eggs have enough money in them to fund a retirement.
The ONS figures show there were 14,850 centenarians (people aged 100 or older) in England and Wales last year, which was up by 104 percent on the figure of 7,270 in 2023.
At the same time there are some 1,088,670 who are over the age of 90, which suggests the number of centenarians are expected to continue rise sharply in the coming decades on the back of improvements in diets, general health, and treatments.
Women make up the largest number of current centenarians – however, the gap between the number of women and men living beyond 100 is reducing.
Clare Stinton, head of workplace saving analysis, Hargreaves Lansdown, said: “Our King is going to get a lot busier writing birthday cards to those people that live to see their 100th birthday.
“Women are miles ahead in the race for long life, 12,130 centenarians, compared to just 2,720 men. But men are catching up. There are still just over twice as many women as men over the age of 90, but the gap has been closing – in 2002 there were three times as many women as men over 90.”
She said that while living to an old age will be the goal for millions of Britons, “increased life expectancy brings serious retirement planning challenges”.
She added: “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.
“Unfortunately, the nation is already under-saving with the most recent data from HL’s Savings and Resilience Barometer showing only 38 percent of households are on track for a moderate retirement.
“It’s not just how we build up our pension that matters – we also need to give serious thought to how we draw down that income in retirement to make sure it lasts.
“Recent FCA Retirement Income Market data showed over 225,000 income drawdown pots had a withdrawal rate of over 8 percent in a year.
“While you may need to make larger withdrawals for ad-hoc reasons such as home renovations or a holiday, taking too much out over a long time period will run down your pension and leave you short of money. Someone withdrawing 8% per year from a £200,000 pension could see their pot exhausted by their mid-80s (assuming investment growth of 5 percent per annum and fees of 1 percent a year.”
Ms Stinton said: “You also need to consider the impact of inflation over a long time period – prices will rise and your income needs to rise with it if you are to maintain your standard of living. However, the same FCA data shows over 80 percent of annuities purchased are level, which means that their income won’t rise with inflation and their spending power will dramatically decrease over the term of their retirement.
“Our longer lifespans should prove food for thought for our new Government as it embarks on a big review of the UK pension system. The issue of pension adequacy will be a major issue, alongside ensuring the pension system delivers the long-term certainty people need to save for retirement with confidence.”
The number of centenarians in the UK has doubled in the past 20 years (Image: Getty)
Alistair McQueen, head of savings & retirement at Aviva, said people need to look at boosting their pension pots to ensure a comfortable old age.
He said: “It is estimated that about one-in-five girls born today could live to 100, and about one-in-seven boys. This has the potential to increase the population of centenarians to over 400,000 over the next century.
“Four hundred thousand is more than the current population of Cardiff or Coventry.”
He added: “Our longer later life is to be celebrated but it also has to be prepared for. There are a record number of people saving for their retirement today – 22 million. This is good news. But government estimate that about four-in-ten people are under-saving for their retirement.”
Aviva suggests the following three retirement saving rules of thumb:
* The 40-year rule: Aim to begin saving for your retirement at least forty years before your target retirement age
* The 12 percent rule: Aim to save at least 12% of your salary in your pension, and remember this can include money from your employer
* The ten-times rule: Aim to amass at least ten-times your salary in your pension fund by the time you reach retirement