Discussing life expectancy as part of your retirement planning is key

Pension Wise, the government’s guidance guarantee service, must discuss life expectancy as part of people’s retirement planning, according to a recent Aviva report.

More accurate picture of life expectancy

The special report on key retirement themes suggests that using nationally agreed longevity figures that take into account the differences between savers and non-savers will provide people with a more accurate picture of their life expectancy.

The report considers the implications for people who underestimate their life expectancy. In particular, people who are savers and healthy are likely to live significantly longer than the national average figures suggest.

New pension freedoms to take effect

People will have far more choice in what they do with their savings from 6 April this year when the new pension freedoms take effect. With the option to take all of their money in one lump sum if they wish, they could find themselves penniless if they outlive their savings. The report highlights significant regional differences in life expectancy in the UK, and the link to lifestyle factors such as smoking and obesity.

The lack of clarity around the interplay of factors affecting life expectancy could mean that many people default to average longevity figures that do not reflect their personal situation, either because they do not understand that as they get older their life expectancy increases or that, as a healthy saver, they need to add years on to their life expectancy.

What do you need to consider?

You should accurately assess your life expectancy as part of your retirement planning, taking into account factors such as existing conditions and lifestyle choices

When thinking about how much money you will need in retirement, you should consider the total savings you have, including all of your assets (such as your property) and measure this against your expenditure and the years you expect to live in retirement

Your life expectancy may change as you get older, so once retired you should review your finances during the course of what could be a long retirement

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.